Shares of SanDisk Corp. (SNDK) reached a 52-week high of $56.49 on Friday, Mar 22, 2013 following solid fourth quarter 2012 results announced on Jan 23, better visibility of NAND growth and growing demand for solid state drives (SSDs).
The closing price of the memory-chip maker on Mar 22, 2013 was $55.19, representing a robust one-year return of about 9.2% and year-to-date return of about 23.4%. Average volume of shares traded over the last three months stand at approximately 3966K.
SanDisk delivered a positive earnings surprise in the last four quarters with an average beat of 17.6%. This Zacks Rank #3 (Hold) company has a market cap of $13.4 billion and a long-term expected earnings growth rate of 13.0%.
Solid Fourth Quarter Results, Growing SSD Focus
SanDisk reported adjusted earnings of 99 cents per share, crushing the Zacks Consensus Estimate of 68 cents per share. Though results fell short of the year-ago numbers by 19.9%, they were 135.7% above the prior-quarter levels. The beat was mainly attributable to solid recovery in the mobile embedded and retail businesses, strength across geographies and favorable supply/demand metrics.
Revenues of $1.54 billion dropped 2.2% year over year but jumped 21.1% sequentially. The quarter’s revenues came slightly above the Zacks Consensus Estimate and within the company’s guidance. The sequential revenue growth was mainly due to strong performances in both the original equipment manufacturer (:OEM) and Retail channels.
Within the OEM channel, mobile embedded, iNAND and SSDs grew decently. Retail products witnessed solid growth due to seasonality and market share gains in most geographies.
Management is positive about SSD revenue growth and better supply/demand metrics in 2013. The company is planning to focus more on iNAND technology, which is expected to drive its mobile-embedded business. They currently expect the launch of several new smartphones and tablets, Ultrabooks and other end-client PCs based on SSDs.
The company expects the SSD contribution to be roughly 25.0% of total revenue moving into 2014.
Strategic Tie-Up with NVIDIA
On Feb 25, SanDisk announced that its iNAND Extreme Embedded Flash Drive will power NVIDIA Corp.’s (NVDA) Tegra 4 mobile processor. The combined force of SanDisk’s iNAND Extreme and Tegra 4 is expected to woo mobile customers with fast processing and digital storage experiences. Given the increasing inclination of consumers/corporate to go mobile with tablets and smartphones, the partnership between SanDisk and NVIDIA seems beneficial for both.
The Zacks Consensus Estimates for 2013 and 2014 rose 5.4% and 8.7% to $3.33 and $3.76, respectively, in the past 60 days. Six and two estimates moved upward for 2013 and 2014, respectively over the same time frame.
However, only one estimate moved downward for 2013 in the past 60 days.
We expect the shift toward NAND SSDs from HDD, muted NAND supply growth and better NAND pricing to be the key drivers for SanDisk’s upcoming quarters.
Furthermore, SanDisk has an Earnings Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) of +10.9%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Other Stocks to Consider
Other stocks in the technology industry that are currently performing well and have a solid visibility include Rambus Inc. (RMBS) with a Zacks Rank #1 (Strong Buy) and Micron Technology Inc. (MU) with a Zacks Rank #2 (Buy).
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