Shares of SanDisk Corp. (SNDK) hit a new 52-week high of $77.00 on Feb 26, eventually closing at $76.54. The closing share price represents a one-year return of 51.6% and a year-to-date return of 10.3%.
The price appreciation can be attributed to the growing demand for solid state drive (SSD) products from SanDisk. The company has also launched several new and innovative SSD products to cater to the pent up demand.
With these launches, we expect SanDisk to strengthen its market position against its competitors such as Micron (MU) and Fusion-io (FIO). Per technology research firm Gartner, the total SSD market is poised for considerable growth, with revenues projected to more than double to $19.4 billion in 2014 from $9.2 billion in 2012. Thus, SNDK has the potential to secure 10–12% revenue share by 2014, up from 3–4% at the end of 2012.
Buoyed by the growing demand, SanDisk posted solid fourth-quarter results with both its top and bottom lines surpassing the Zacks Consensus Estimate. Revenues from commercial and retail channels were strong, aided by higher mobile embedded and SSD sales. Moreover, the acquisition of SMART Storage Systems is expected to expand SanDisk’s offering in the Enterprise SSD segment.
Management is positive about SSD revenue growth, favorable product mix and better supply/demand metrics in 2014 but expects modest price decline. The company expects bit supply to increase in the range of 25% to 35%.
However, lackluster PC sales, European issues, competition from its peers and currency fluctuations could hurt fundamentals to some extent.
Other Stocks to Consider
Currently, SanDisk carries a Zacks Rank #3 (Hold). Investors may, however, consider a better-ranked stock Lexmark International (LXK), boasting a Zacks Rank #1 (Strong Buy).