Needham Remains Cautious on SanDisk Corporation as Earnings Pre-Announcement Paints Dire Picture


Needham analyst Rajvindra Gill came out today with his views on SanDisk Corporation (NASDAQ:SNDK), after the company pre-announced a first-quarter forecast reduction from $1.45 billion to $1.3 billion due to product delays, slow enterprise sales and lower pricing. The analyst reiterated a Hold rating on the stock.

Gill noted, “When we downgraded the stock on 1/12 we saw several structural challenges facing SNDK, which we think will persist: 1) unfavorable mix with 1/3 of revenue from removable products, where pricing is fierce; 2) a lack of mobile DRAM solution impeding growth in the China handset market as eMCP adoption accelerates; and 3) NAND GMs of 45% that are unsustainable relative to competition (+1500 bps higher). Our ests for ’15/’16 decline materially. We anticipate significant P/E multiple contraction (from peak of 16x to trough levels of 8-10x), and hence continue pressure for the shares.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rajvindra Gill has a total average return of 20.3% and a 59.5% success rate. Gill has a 25.0% average return when recommending SNDK, and is ranked #59 out of 3547 analysts.

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