Monday, September 18, 2006

Calls of Note Part 1

Citigroup notes SanDisk (NASDAQ:SNDK) enjoys near term catalysts. Declining fuel costs are removing consumer electronics spending doubts, while spot and contract pricing appears a tailwind through mid-4Q06. SNDK appears firm's highest-conviction 3Q/4Q results/outlook story, and past out-year estimate revision trends argue for a bump in 2007 estimates, exclusive of potential Hynix royalties.

Firm notes 3Q-to-date, SNDK shares are up 15% to $58.5, though prior five and three-year average 3Q appreciation of 27% and 65%, respectively would argue for a quarter ending share price of between $64 and $84. Looking further ahead, they note 4Q five-year share appreciation has averaged 23%, suggesting upside potential to $72 from current levels. Taking the average of the three prices suggests upside potential to $73, up 25%.

Reiterates Buy and $69 price tgt.

Notablecalls: This note should be good for a gap up, but wouldn't call it actionable. As for the "calculation" of stock's upside potential, looks like it is borrowed from some Yahoo! message board.