Sandisk (NASDAQ:SNDK): Davenport reits Strong Buy
Davenport reits Strong Buy on Sandisk (NASDAQ:SNDK) saying the sell-off on CEO comments appears to be overdone. SNDK shares sold off aggressively yesterday (taking the broader market with them) following comments by CEO Eli Harari at a technology conference that U.S. memory card sales were “relatively soft” in April and demand was similar to what the company experienced during 1Q’08. Dr. Harari also voiced his belief that high energy prices are likely having some impact on US consumer spending.
Firm ntoes they are surprised by the magnitude of the market’s reaction (down $2.42 or 7.5%) to these comments as they are in-line with the tone management struck during its 1Q’08 conference call on April 17th when they suggested that U.S. consumer weakness would continue throughout the balance of the month. Further, Dr. Harari indicated that SNDK’s business remains robust outside the US, as was the case in 1Q’08 when non-US sales powered the company to ~5% revenue upside versus consensus despite US weakness. Finally, as was stated during the conference, SNDK’s 2Q performance is generally heavily back-end loaded with the vast majority of the company’s 2Q performance yet to be
recorded.
More importantly, SNDK indicated that it continues to expect business conditions to improve during the second half of the year as a more benign pricing environment and seasonal strength combine for much improved 2H results.
Notablecalls: SNDK’s a buy here at $29 and change. See below.
Sandisk (NASDAQ:SNDK): Buying opportunity has emerged – Citigroup
Citigroup is out with a pretty brilliant defense on Sandisk (NASDAQ:SNDK) noting the shares fell 7.5% after a morning conference presentation by CEO Eli Harari, a drag on the SOXX. Citi’s review of broader NAND data suggests a buying opportunity has emerged.
The typically upbeat Harari was noticeably restrained. That said, he indicated Europe remains strong (44% of sls), and left OEM sales un-addressed (all geos; 42% of sls).
Firm notes that understandably they braced for weak April US retail sell through data (cards+drives+MP3 players) in the afternoon’s NPD release. However, we found SNDK bit growth was just 300 bps below seasonal (helped by easy comp) while ASPs were actually 300 bps better than seasonal. Separately, theyconfirmed with SNDK that its Europe and Asia market share trends are firm, the OEM biz solid. Firm concludes SNDK is likely working to keep Street expectations in check, in particular as: 1) much of the Mom’s/Prom’s/Dad’s/Grads selling season lies ahead, and 2) some competitors have recently raised 2Q GM ests (2Q08 to be the trough). Overall, they are comfortable with their 2Q08, 3Q08 and 2008 ests.
While end demand risks persist, the body of evidence Citi sees continues to point
toward steadily firming fundamentals into and through 3Q08.
They think positive EPS revision catalysts remain in play in July through October and on a target of $35, but with upside to $40 if multiples inflate seasonally.
Reits Buy.
Notablecalls: I think Citi is doing the right thing here defending SNDK. What we saw yesterday was just profit taking following the recent run (can’t blame the bold ones who bought the stock in the low 20’s taking some of it off the table). Citi has done a good job covering SNDK recently and I think the stock is a bounce candidate here.
For the record, Lazard and JPM are somewhat cautious on SNDK this AM. – fyi only.
The stock’s a buy below $30.
