Micron (MU) Stock Surges 10% on DRAM Discount News - Stocks in the News
Micron Technology (MU) was up 9.6% in trading today upon news that it amended its DRAM supplying agreement with Inotera. The agreement, signed in 2013, allows Micron (MU) to buy Inotera’s DRAM output for market price. However, now that the agreement has been amended, Micron can now get a discount on market prices off of Inotera’s DRAM output for the rest of 2015.
There has been speculation that Micron would underperform with its DRAM output. This new news should bottle those worries away till at least the end of 2015, at which point Micron and Inotera have a new agreement that kicks in (2016), saying that the “price for DRAM products sold to Micron is based on a formula that equally shares margin between Inotera and Micron”. This agreement has a two year term.
MU currently holds a Zacks Rank #3 (Hold). The industry outlook isn’t too good, standing amongst the bottom 7% of industries. MU does have a favorable PEG ratio of 0.68 going for it, compared to 3.05 on average for the industry.
Less is more in this category, suggesting that MU may very well be an undervalued stock, while it may see a margin boost thanks to this deal. Another valuation to point out is the PE in general, which is 7.69 for MU, compared to a whopping 36 for the industry. Micron Technology reports its earnings on 4/2/15.
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