Updated Research Report on SanDisk Corp. - Analyst Blog

On May 30, 2014, we issued an updated research report on flash storage solutions provider SanDisk Corp. SNDK. SanDisk is witnessing robust demand for its NAND technology and is thus a making considerable effort to push its client and enterprise solid state drive SSD products in the market.

Enterprise-class SSDs are faster and more energy efficient than traditional hard drives — the main factor driving demand. These SSDs also occupy less space making them more suitable for mobile computing devices.

Given the increasing inclination of both individual and corporate customers toward mobile devices (both tablets and smartphones), we believe that the partnership between SanDisk and original equipment manufacturers such as Apple AAPL and NVIDIA NVDA to name a few, to provide customized data storage solutions seems to bode well for the company.

Buoyed by these positives, SanDisk expects to generate approximately 40.0% of its revenues from SSDs in 2017, significantly up from 19.0% in 2013. SanDisk, therefore, expects $1.0 billion from enterprise SSD sales by 2016.

It is worth noting that SSD revenues jumped 61.0% on a year-over-year basis and comprised 28.0% of total revenue in the last reported quarter (first-quarter 2014), which is indicative of the company's long-term prospects.

To complement its growth prospects, SanDisk has also resorted to strategic acquisitions. The company acquired SMART Storage Systems and Pliant Technology in the SSD segment. Furthermore, the acquisitions of FlashSoft and Schooner Information Technology not only provided the company a solid traction in the client SSD market, but also enhanced its SSD-software competence.

Apart from this, SanDisk's Bit Cost Scalable or BiCS 3D NAND technology is in the development process and is expected to be ready for mass production in 2016.

Nonetheless, the NAND and SSD spaces are becoming highly competitive with companies such as Micron MU making their presence felt, which is a headwind for the company. Moreover, continued lackluster PC sales and other factors such as higher capital requirements and a complex production process may delay product rollouts which may result in market share losses.

Currently, SanDisk has a Zacks Rank #2 (Buy).

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