Can SanDisk Continue Upward Stock Movement in 2015?



2Q15 results beat estimates, but revenues and net income fall

Although SanDisk (SNDK) has declared better-than-estimated 2Q15 results, the company’s revenue fell 24% year-over-year and 7% quarter-over-quarter. Net income declined 52% year-over-year and 108% quarter-over-quarter, although its business is largely expected to get increasingly better in the next three-month period.

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Reasons for revenue and income decline

Judy Bruner, CFO (chief financial officer) of SanDisk, explained the company’s poor quarterly results. “Our client SSD revenue declined as expected, due to the end of life during Q1 of a program with a major customer (probably Apple. Editor), while our client SSD revenue with other OEM customers increased nicely from Q1 to Q2.”

The enterprise revenue segment saw a decline as well due to the seasonality of certain products.

Future outlook

SanDisk expects the industry’s year-over-year supply bit growth to be above the previous estimate of 40%. It also expects the captive bit growth rate to be according to industry estimates. As for 3Q15, SanDisk expects revenue generated to be higher than 2Q15, from $1.35–$1.45 billion. It expects fiscal 2015 revenues to be in the range of $5.4–$5.7 billion, which is still a 15% decline compared to fiscal 2014.

Stock trading at a discount to analyst estimates

The last traded price for SanDisk (SNDK) on July 24, 2015, was $61.84. Compared to median analyst target estimates of $69.50, the company is currently trading at a discount of 11% and seems to be an attractive buy at the current market price. Of the 36 analysts covering this stock, 16 have a “buy” recommendation, two have a “sell” recommendation, and 18 have a “hold” recommendation.

Peer companies such as EMC (EMC), Hewlett-Packard (HPQ), and NetApp (NTAP) generated returns of 1.43%, 1.48%, and -0.13%, respectively, in the week ended July 24.

SanDisk comprises 0.36% of the Technology Select Sector SPDR ETF (XLK).


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