SanDisk Corporation (NASDAQ:SNDK) provided a grim business update on March 26 while executives noted their disappointment. The weakened outlook caused SanDisk shares to plummet to a new 52-week low of $63. The flash-memory storage company produces SSDs for data storage, flash drives, memory cards, and software.
For the first quarter ending on March 29, SanDisk cut its revenue forecast to $1.3 billion, down from a range of $1.4 to $1.45 billion. SanDisk attributed the decrease to “product qualification delays, lower than expected sales of enterprise products and lower pricing in some areas of the business.” SanDisk has withdrawn other forecasts for the first quarter and will wait to announce earnings until its report is released on April 15.
CEO Sanjay Mehrotra noted, “We are disappointed with our financial outlook. We will work through these headwinds, leveraging our compelling product roadmap and broadening customer base. We believe our growth prospects remain strong and we are encouraged by the progress we are making in our 3D NAND technology.”
SanDisk, and the semiconductor sector at large, has had a series of setbacks this year. Between the increased strength of the U.S. dollar to fluctuations in chip supply, competitor Intel Corporation (NASDAQ:INTC) also slashed revenue guidance. However, analysts are unsure if the strong headwinds are inherent to the whole sector or attributed to the performance of indivivdual companies because MicMicron Technology, Inc. ron (NASDAQ:MU), another competitor in the field, beat estimates in second quarter earnings results amid these headwinds.
However, despite the bad news from SanDisk, analysts remain bullish on the stock.
On April 2, analyst Jim Kelleher of Argus Research reiterated a Buy on SanDisk with a price target of $86. Kelleher added that SanDisk should have provided a timeline detailing when the hindrances will subside, noting that he expects “more color on the environment and outlook when SanDisk reports results in mid-April.” Kelleher commented, “Investments made in growth niches, such as SSDs and flash-based arrays, should increasingly pay off in 2016. We also look for the company to get a better handle on its supply chain in 2016.” Kelleher remains bullish because while others have sharply reduced expectations, “declines in SNDK more than discount the challenges ahead.”
Overall, Kelleher has a 75% success rate recommending stocks with a +16% average return per recommendation.
Separately on March 31, analyst Ruben Roy of Piper Jaffray maintained an Overweight rating on SanDisk, though he did not provide a price target. Roy remains bullish on the stock following the grim outlook but cautioned investors that “this one will take some patience.” He added that the stock is at a decent valuation due to its low trading price. Roy adds that the “silver lining,” though may be difficult to picture, “is that the EPS leverage in the model works both ways.”
Overall, Ruben Roy has a 57% success rate recommending stocks with a +11.9% average return per recommendation.
On average, the top analyst consensus for SanDisk on TipRanks is Moderate Buy.