How a Plant Fire Helps Micron and SanDisk

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Micron Technology Inc. (NASDAQ: MU) and SanDisk Corp. (NASDAQ: SNDK) are both winning at the loss of one of their competitors in the world of DRAM. Reports of a fire at a Chinese plant under rival SK Hynix Semiconductor is giving these companies another leg up. In fact, Micron even hit a new multiyear high earlier on Wednesday.

Stern Agee said that there is potential for a minor DRAM-NAND disruption from this Hynix fire as a potential supply disruption. Sterne Agee said that this would be a positive for both SanDisk Corp. (NASDAQ: SNDK) and Micron Technology Inc. (NASDAQ: MU). These shares are both rated as Buy at the firm.

China’s Xinhua News reported,

One person has been slightly injured after a factory workshop in east China’s Jiangsu Province caught fire on Wednesday afternoon. … The fire broke out at 3:30 p.m. in a workshop of SK Hynix Semiconductor Company (China) in Wuxi City. Witnesses told of dense smoke coming from the building.

Piper Jaffray has also “piped” in here. Both Micron and SanDisk saw their Overweight ratings reiterated because it believes that the workshop produces some 170,000 wafers per month. It also noted that this one spot may contribute as much as 15% to 20% of the worldwide global DRAM capacity. DRAM pricing was noted as being down 5% to 15% in this quarter, but up 70% or so year to date.

Micron Technology Inc. (NASDAQ: MU) was up over 4% at $14.59 and hit a new multiyear high of $15.27 earlier on Wednesday. SanDisk Corp. (NASDAQ: SNDK) is up right at 3% at $56.95 against a 52-week range of $38.47 to $63.97. Jefferies also reiterated its Buy rating and $21 price target for Micron. We are seeing similar gains in Spansion Inc. (NYSE: CODE), up 2.3% at $10.69, but we would warn that its 52-week range is $9.96 to $14.54. Wells Fargo initiated coverage with an Outperform rating and a $12 to $14 valuation.

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