Needham Remains Cautious on SanDisk Corporation as ‘Structural Concerns Come to Fruition’

In a research report released Thursday, Needham analyst Rajvindra Gill reiterated a Hold rating on SanDisk Corporation (NASDAQ:SNDK), after the company announced disappointing first-quarter earnings results, and offered significantly lower guidance than anticipated. The decrease in revenue reflects the fall in chip prices and product delays. The stock is currently trading down 4.79% at $67.71.

Gill noted, “We have been saying for some time that GM% was structurally too high, and saw evidence of that thesis develop even quicker than anticipated, with 2Q15 GM% over 1,000 bps below levels seen just three quarters ago. While 1H15 impacted by the loss of a major client SSD customer, we contend that SNDK’s LT product portfolio continues to be misaligned to the declining retail market and that the company will need to adjust its enterprise strategy away from PCIe in the near term. We have significantly cut our estimates for the third time this year.”

Furthermore, “We believe SanDisk will continue to be impacted by soft pricing as the decline was most pronounced in retail and private label products. We are skeptical of management’s belief that it will be able to offset margin erosion related to the declining retail segment with a higher share of enterprise revenue.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rajvindra Gill has a total average return of 22.2% and a 65.8% success rate. Gill has a 25% average return when recommending SNDK, and is ranked #36 out of 3572 analysts.

Out of the 34 analysts polled by TipRanks, 20 rate SanDisk stock a Buy, 12 rate the stock a Hold and 2 recommend a Sell. With a return potential of 28%, the stock’s 12-month consensus target price stands at $86.68. BTIG analyst Walter Piecyk also weighed in on SanDisk today, downgrading the stock to Sell and reducing the price target to $47 (from $70), which reflects a potential downside of 34% from last closing price.


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