Monday, May 14, 2007

Sandisk (NASDAQ:SNDK): May have some s-t upside in it

- Citigroup is positive on Sandisk (NASDAQ:SNDK) saying QTD NAND contract pricing action augments near-term plusses (margin and expense related upside potential) and intermediate-term catalysts (pos 2H07 est revisions and multiple expansion), bolstering conviction in their call.

Tactically, they advise investors to build positions patiently thru the Q on market volatility (for now less urgency needed than in analog Co's ADI, ISIL, FCS and SMTC). NAND contract pricing was stable in 1H May and overall densities are tracking flat QTD with 4Gb+ up 10% (vs 1Q averages). While the firm expect a modest June swoon (seasonality), prospects are increasing better-than-modeled 2Q07 pricing (-5% embedded in their 3Q07 royalty calculation). Recalls Samsung/Hynix guided to +20% 2Q pricing).

Citi remains confident NAND fundamentals can move into under-supply by late-3Q. Upcoming milestones impacting sector psychology include: 1) MOT's 5/15 new product launch (embedded/removable NAND demand), 2) Bi-monthly contract pricing updates 3) Monthly US retail card/drive/MP3 sell-through date (released the last week of each Q (NPD/CIR)), and 4) Apples's late-June iPhone aunch (embedded/removable NAND demand).

Notablecalls: Well, SNDK's chart looks good. May have couple of bucks of upside in it if it gets moving. One to watch.

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