Bearish on SanDisk: Is a NAND Glut Looming?

Jun.18.09 | About: Western Digital (WDC)

SanDisk (SNDK) shares are coming under pressure this morning after Needham analyst Y. Edwin Mok cut his rating on the stock to Under Perform from Hold.

Mok writes in a research note that the downgrade reflects “early signs of weakness in the NAND flash memory sector that we believe will lead to lower prices.” He contends checks find that NAND product inventories have increased substantially, and that demand in both the retail and OEM channel has slowed since May. Heading into the second half, he writes, “we are concerned that production ramps” -Mok expects higher output from both Samsung and Toshiba - “will swing the NAND sector into over supply.”

Mok says the Street expects Q2 to bear estimates due to conservative guidance, but he notes that Q3 guidance could disappoint if price declines accelerate. “We believe SNDK will pull back on further declines in NAND prices, and recommend investors sell shares,” he writes.

SNDK Thursday is down 93 cents, or 6.2%, to $14.12.

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