by Brendan Gilmartin
Overview
Sandisk (SNDK) is scheduled to report 4Q 2011 earnings after the closing bell on Wednesday, January 25. The results are typically released close to 4:05 p.m. EST and will follow with a conference call at 5:00 p.m. Sandisk shares rallied in after-hours trading on Tuesday after Apple (AAPL) reported a blowout quarter. For its part, Sandisk supplies NAND flash memory to Apple.
Outliers & Strategy
- Key measures:
- Non-GAAP Earnings Per Share: The current Street estimate is $1.26 per share (Source: Yahoo! Finance). Given the high expectations headed into the 4Q release, estimates are running as high as $1.38. Note that shares have rallied more than 9% after the two previous releases as Non-GAAP EPS topped the consensus by an average margin of 13.05%.
- Revenues: The current consensus is $1.57 bln, with estimates on the high side at $1.63 bln.
- A positive report from Sandisk could also bode well for rival Micron Technology (MU).
- Aside from market fundamentals, Sandisk shares are near a 52-week high on persistence takeover chatter, with Toshiba Corp. frequently mentioned as a potential suitor.
Recent News
- 01/09: From the Las Vegas CES Conference, SanDisk introduced the 128 gigabyte (GB)1 SanDisk Extreme® SDXC™ UHS-I card, ideal for capturing Full HD2 3D videos and high-resolution photos.
- 01/06: Sterne Agree upgraded Sandisk from Neutral to Buy and raised the price target from $55 to $57, according to a post at Forbes.com. The firm asserted that weaker handset volumes in Europe appear priced into the shares, while NAND price declines should be more muted in 2012, thanks in part to the rollout of the iPad 3.
- 01/03: Goldman Sachs downgraded Sandisk from Buy to Neutral with a price target of $51, according to StreetInsider.com, citing several factors, including:
- Risk of oversupply in NAND flash.
- Risk of price declines and margin pressure.
- Limited upside in the share price following the recent spike.
- 12/15: Oppenheimer maintained an Outperform rating and $65 price target on Sandisk, according to Benzinga.com.
Technical Review
Sandisk shares recently flirted with the 52-week high of $53.60 (10/28/2011) - a potential resistance barrier in the event of a stronger than expected earnings release. Other positive signals include the now upward-sloping MACD and the recent crossover of the 20-Day SMA above the slower 50-Day SMA - indications of improving momentum. Should earnings disappoint or fail to meet the high end of expectations, initial support is at the aforementioned 50-Day SMA near $49.50, with further downside risk to $47.50 and the 200-Day SMA near $45.00. (Chart courtesy of StockCharts.com)
click to enlarge
Summary
Sandisk shares are sharply higher since late summer, benefiting from increased NAND demand, a strong relationship with Apple, a suite of new products, takeover speculation, stabilizing handset volumes in Europe, and forecasts for stable seasonal price declines entering 2012. With expectations this high, Sandisk needs to deliver earnings and revenues at the high end of Street forecasts in order to sustain the advance. Risks include a possible "sell the news" scenario even if results come in marginally above estimates.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
