SanDisk (NASDAQ: SNDK) shares plunged yesterday, January 12th, when the semiconductor company lowered estimates for their fourth quarter earnings. SanDisk had previously forecasted revenue of $1.80 billion to $1.85 billion, but this was revised and lowered to $1.73 billion. Likewise, initial estimates for Non-GAAP gross margin of 47% to 49% were lowered to 45%. The company will post final earnings for the fourth quarter of 2014 on January 21st.
SanDisk attributed the lower revenue forecast to “weaker than expected sales of retail and iNAND.” SanDisk’s iNAND is a flash memory chip used in computers, phones, and other electronic devices. Since SanDisk provides chips to retailers such as Samsung and Apple, much of SanDisk’s growth was attributed to the boom in smartphones. Even though Apple posted successful smartphone sales in 2014, some think SanDisk is being impacted by growing popularity of off-brand smartphones in developing markets. Some also believe that SanDisk’s stagnating sales are due to Samsung’s renewed efforts in the chip business.
On January 12th, analyst Rajvindra Gill of Needham downgraded SanDisk from Buy to Hold. In response to the company’s lowered guidance, Gill noted, “We are particularly disappointed in the [gross margin percentage] performance, with 4Q14 levels now expected to be at their lowest since 1Q13. With SanDisk’s growing CapEx and downward trending [gross margin percentage], FCF may have peaked, which could limit capital return to shareholders in 2015 & 2016.” The analyst continued, “Furthermore, we believe Samsung is at least one year ahead of SNDK in its progress toward 3D NAND, possibly altering its competitive position in the NAND market long-term.”
Rajvindra Gill has rated SanDisk 11 times since July of 2012 with an 89% success rate recommending the stock and a +29.8% average return per SanDisk recommendation. Overall, Gill has a 63% success rate recommending stocks with a +19.4% average return per recommendation.
Separately on January 12th, analyst Vijay Rakesh of Sterne Agee reiterated a Buy rating on SanDisk with a $125 price target. Rakesh believes that the impact of smart phone sales on SanDisk is short term and he expects the second quarter to “improve significantly.”
Vijay Rakesh has rated SanDisk 19 times since March of 2009 with a 77% success rate recommending the company and a +22.6% average return per SanDisk recommendation. Overall, Rakesh has a 76% success rate recommending stocks with a +39% average return per recommendation.
On average, the top analyst consensus for SanDisk on TipRanks is Moderate Buy.