Tuesday, January 29, 2008

Sandisk (NASDAQ:SNDK): Will it go green today?

I see couple of firms out positive on Sandisk (NASDAQ:SNDK):

- Citigroup notes their bullish call on SNDK share has been the wrong one in the past four months. However, surprisingly robust 2H07 gross margins augur well for EPS revisions ahead if fundamentals firm as seasonal demand strength and supply headwinds converge in 2Q08 as they expect. US demand risks persist, though trough P/E multiples discount 2008 EPS power 10% below their just-lowered estimates, suggesting the stock may now be overshooting on the downside. Target to $46 from $57 for 89% ETR (aftermarket). Maintains Buy.

- Cowen notes that while rev. and OM are in-line with their ests., they were very positively surprised by the strong product GM guidance which we believe is being driven primarily by increased cost efficiencies as SNDK transitions to 43nm (from 56nm) in 2008. Firm is leaving their 2008 ests. unchanged as SNDK's full year guidance is largely in-line with their expectations.

- Avian Research notes that generally speaking they did not expect much in terms of good news from SNDK given the environment. Maybe a bit worse then they expected was SNDK assertion that MLC based SSDs will launch at the end of ‘08 rather then mid year - although no one realistically estimated any real volumes till ’09. Firm expects NAND pricing to hit bottom over the next two months.

Conditions will then improve, 1st lifting in late April ahead of “Dads and Grads,” perhaps getting another unexpected lift in summer from the Olympics, and then finally coming into balance in late ’08 ahead of the holiday selling season. They have actually been pleasantly surprised at the relatively benign pricing action they have seen so far in January vs their very pessimistic expectations, although like everyone else, they hold little hope that conditions will remain this stable. Firm heard nothing on the call change their recently positive opinion on the name. Given SNDK’s current valuation, the expected reacceleration of demand growth in ’09, continued yield and cost gains, as well as what they are sure will be a greater industry reluctance to add capacity, they think SNDK should be bought at these levels.

Notablecalls: Will SNDK end the day on the green side today? I certainly believe it could. Just check out the margins.

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