Why Did Micron Technology (MU) Fall 20%?

For no apparent reason or warning, shares of Micron Technology (NASDAQ: MU) fell a decisive 15.5%. Markets decided that even with a six times forward P/E, the $50 a share level started to spook investors. What happens next depends on the trading behavior of MU stock ahead of its earnings on December 19.

At $42, Micron still trades at a P/E below 10 times. On November 28, Standpoint Research issued a "hold" rating on the stock, capitalizing on shareholder fears. Recall, too, that tech stocks fell to the bottom of their upward trading range. That is, bell-weathers like Facebook (NASDAQ: FB) fell 4% while Netflix (NASDAQ: NFLX) fell 4.5% last week. But investors have a short-term memory.

Last quarter, on September 26, Micron reported earnings that easily beat EPS and revenue estimates. Revenue grew 91% to $6.14B in the fourth quarter. At a Credit Suisse technology conference, Microns CEO reiterated its cost and technology advantages for its NAND architecture of CMOS under the ray. It is now deploying that into production to solidify its position in SSDs (solid state drives).

MU stock could fall below $40 or hold its level but one thing is certain: earnings will blow away expectations.