SanDisk: Benefiting From the Flash Drive Trend

Dec.15.10 | About: Western Digital (WDC)

I originally recommended SanDisk Corp, (NDQ: SNDK) on June 21/10 (IWB #20122) at $49.02. The stock closed Friday at $49.60 (all figures in U.S. currency).

This stock has spent the last few months essentially going nowhere. When the founding CEO announced that he was going to retire, the stock took a large dip, falling to as low as $33.13 at the end of August. But it has since recovered strongly and is now trading at about the same price at which I recommended it, closing Friday at $49.60.

I still like this stock since it benefits from the trend towards flash drives, which is being helped along by the success of the iPad and will be reinforced by the subsequent rollout of additional tablet computers scheduled during the first quarter of next year. Increasingly, smart phones are using flash storage for their camera phone functions and music storage as well.

Earning growth has been strong this year, increasing by over 35% in the most recent quarter compared to the same period a year ago. This continues the company's pattern of positive earnings growth over the past two years. Revenues also grew by over 31% compared to the same quarter last year and the company enjoys high profit margins at over 54%.

Action now: Buy with a target of $55.

Disclosure: I am long SNDK.