Why Micron Stock Lost 14% in December

Shares of Micron (NASDAQ:MU) were sliding last month after the memory-chip maker offered disappointing guidance in its fiscal first-quarter earnings report.

The sell-off following the report wiped out some solid gains, as the stock rose earlier in the month after the Commerce Department finalized a $6.17 billion subsidy related to the CHIPS Act for the company to build new manufacturing plants in New York and Idaho.

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According to data from S&P Global Market Intelligence, the stock finished the month down 14%. As you can see from the chart, shares fell sharply after the earnings report came out in the middle of the month and stayed down from there.

MU data by YCharts

Guidance trips up Micron

Prior to the earnings report, the only significant news on Micron was the CHIPS Act award being finalized, but that payment had been widely expected, so it's unclear if it directly fueled Micron's gains in the first half of the month.

The stock then plunged 16% on Dec. 19 after it released first-quarter results. The company actually edged past estimates in the quarter and posted strong year-over-year growth. Revenue jumped 84% to $8.71, essentially matching estimates at $8.7 billion, and adjusted earnings per share came in at $1.79, which compared to a per-share loss of $0.95 in the quarter a year ago, and topped the consensus at $1.77.

However, investors balked at fiscal second-quarter guidance, as the company called for a sequential decline in revenue and profits, seeing revenue of $7.7 billion-$8.1 billion, which was well below the consensus at $8.97 billion, and adjusted EPS of $1.33-$1.53, also below the consensus at $1.77.

Management blamed weak near-term demand in "consumer-oriented markets" but expected a return to growth in the second half of the year.

Image source: Getty Images.

What's next for Micron?

Micron shares have rebounded to start 2025 in the wake of excitement around Nvidia naming the company as a key supplier for its GPUs. Nvidia is believed to be Micron's biggest customer, so the relationship appears to be getting stronger, which should be lucrative for Micron.

Through Jan. 7, the stock is up 21% for the month. It continues to look like a bargain, trading at a forward P/E ratio of 14.5, and it's growing rapidly following an earlier lull in memory chips.

The stock could easily move higher from here, especially if the artificial intelligence (AI) boom picks up steam.

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Jeremy Bowman has positions in Micron Technology and Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.