On Jan 7, Zacks Investment Research upgraded SanDisk Corp. (SNDK) to a Zacks Rank #1 (Strong Buy).The upgrade came on the back of positive estimate revisions over the last 60 days. SanDisk’s shares were up 50.9% over the past one-year period. Moreover, SanDisk has delivered positive earnings surprises in the last four quarters with an average beat of 27.94%.
Why the Upgrade?
Over the last 60 days, SanDisk witnessed one upward revision for the current quarter as well as for fiscal 2013. The Zacks Consensus Estimate for both the current quarter and the full year went up by a cent to $1.47 and $4.89, respectively, over the same period of time.
It is also worth noting that the Zacks Consensus Estimate for SanDisk’s fourth-quarter revenues is within management’s guided range. SanDisk guided revenues to be between $1.650 billion–$1.725 billion, and the Zacks Consensus Estimate is pegged at $1.702 billion.
Moreover, management remains positive about solid state drive (SSD) revenue growth, favorable product mix and better supply/demand metrics in fiscal 2013 which will boost pricing. SanDisk also expects a ramp up in the demand for its latest 19-nm technology.
Apart from this, SanDisk is planning to focus more on iNAND technology which will drive its mobile-embedded products. The company also expects its total SSD contribution to be roughly 25.0% of the total revenue moving into 2014.
Moreover, the acquisition of SMART Storage Systems is expected to expand SanDisk’s offering in the Enterprise SSD segment.
Though lackluster PC sales, European issues, competition from Micron Technology Inc. (MU) and currency fluctuations could hurt fundamentals to some extent, we remain positive on management’s commentary of a turnaround story in the coming quarters and strong secular demand for NAND flash.