SanDisk Earnings: Looking At Fundamental Drivers To Support Outlook

SanDisk (NASDAQ:SNDK) – the maker of solid state drive (SSD) memory, flash cards and USB flash drives – is due to announce its latest earnings on April 19, 2012. It has already issued a lowered earnings guidance due to weak demand and a poor pricing environment. We expect earnings to be slightly above the newly provided guidance. ^[1]

See our full analysis on SanDisk

Outlook for 2012

The company’s double digit y-o-y growth in the past four quarters averaged around 17%, which has supported the stock. Though the outlook for the overall solid state device industry has been lowered, SanDisk is still likely to show solid growth based on greater demand for SSD. Solid state memory devices contributes about 28% to its stock price, and this division is likely to grow the most in 2012 as we have explained below. The pricing of NAND memory chips is likely to fall and will lead to lower margins for this segment.

Tablets, Netbooks And Ultrabooks to Drive Demand

Solid state memory chips will see an increasing demand as the year progresses due to demand from tablet and thin client manufacturers as well as netbooks. As more companies move to the cloud computing environment, demand for SSD drives from the server market will also rise. Increasing smartphone and digital camera adoption will also push up sales of flash memory cards.

We estimate that these factors will lead 2012 earnings to be slightly above the company’s new guidance. We currently have a $54.20 Trefis price estimate for SanDisk, about 8% above the market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. SanDisk sees weak demand, pricing hurting rev,margins, Reuters, April 3, 2012 [↩]