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SanDisk Corp. Message Board

  • greg_flies greg_flies May 14, 2010 11:51 AM Flag

    Morgan Stanley Gets It - EPS & Price Target Raised

    This was posted by Shlomi Cohen:

    Morgan Stanley 14 May

    Conclusion: We reiterate our OW thesis and raise our
    price target to $49 based on revised estimates, which
    reflect firming SNDK product pricing so far in Q2, as
    indicated by our proprietary tracker (Ex 1). In addition,
    we continue to believe constrained NAND supply and
    share gains at handset/tablet OEM’s like AAPL will
    support stable product margins this year. We view
    SNDK as the best derivative play on tablet PC ”wars” in
    2H as tablets could generate ~8x more NAND demand
    than notebooks (Ex 3). And new smartphone rollouts
    are set to drive widespread adoption and higher NAND
    content per handset (Ex 4) going forward.
    What’s New: Our weekly proprietary pricing tracker
    shows SNDK product pricing up 8%, or better than our
    expectations for flat to down seasonality. As a result, we
    raise our 2Q ASP/bit assumption to down 6% Q/Q from
    down 8% and increase product gross margin to 41%
    from 40% prior. Our FY10 rev/EPS estimate moves to
    $5.06B/$4.23 from $4.92B/$4.00 and FY11 rev/EPS to
    $6.15B/$4.48 from $5.85B/$4.18.
    Where we differ: While we remain Cautious on the
    group, we prefer semis with exposure to strong product
    cycle fundamentals like NAND. Furthermore, we do not
    see double booking or inventory build in NAND, as our
    tracker data show SNDK channel inventories at normal
    seasonal levels (Ex 2). Our revised FY10 revs/GMs are
    ~3%/150bps above the high end of company guide and
    reflect our mid-term outlook for healthy NAND
    supply/demand. Our new price target of $49 is based on
    ~11x CY11 EPS estimate of $4.48, and risk-reward
    looks attractive on our $60/$35 bull/bear cases.

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