U.S. Markets closed

SanDisk shares down after cutting 1Q outlook

NEW YORK (AP) -- Shares of SanDisk Corp., which makes memory chips, fell Wednesday after it cut its revenue guidance for the first quarter.

THE SPARK: Late Tuesday, the Milpitas, Calif., company said it expects to report first-quarter revenue of $1.2 billion, down from an earlier forecast of $1.30 billion to $1.35 billion. It was also below the average analysts' forecast at $1.34 billion, according to FactSet.

It lowered its forecast for gross margin, saying it would come in below 39 percent, rather than between 39 percent and 42 percent.

SanDisk is scheduled to report full first-quarter results on April 19.

THE ANALYSIS: Analysts noted that SanDisk didn't provide a lot of detail on what's behind the shortfall, beyond saying that demand was weaker than expected. Several of them cut their full-year forecasts to match the first-quarter outlook and reduced their price targets.

However, analysts said they expect demand to come back in the second half of the year. SanDisk's flash memory goes into smartphones and camera memory cards, and increasingly also into laptops.

Flash memory prices can be volatile, but Sidney Ho at Nomura Securities said suppliers like SanDisk have been careful about adding capacity, which should help avoid a collapse of prices in the latter half of the year.

Caris analyst Craig Ellis went a step further, downgrading the stock from "Buy" to "Above Average," after reducing his estimates for full-year results. He cut his price target from $63 to $55.

SHARE ACTION: SanDisk shares fell $5.11, or 10.2 percent, to $44.94 in afternoon trading. The stock last traded at that level in January.