Wedbush: SanDisk Expectations Are Low, But Structural Problems Haven't Changed

SanDisk Corporation SNDK is scheduled to announce its second quarter financial results after the market closes on Wednesday, and several research firms are weighing in on the stock ahead of the report. While Nomura and Pacific Crest are constructive about the company, Wedbush maintains a more Neutral stance.

In a report issued Monday, analyst Betsy Van Hees reiterated a Neutral rating and trimmed her price target from $52.00 to $50.00 assuring that, although expectations are already low, “structural issues remain unchanged.”

Wedbush expects to see ASP declines and product mix weigh on the quarterly results and the guidance for the upcoming quarter. “While investors may be trying to bottom tick the stock on a 2H recovery,” Wedbush analysts recommend investors to remain on the sidelines, as SanDisk’s structural issues are not “a one to two quarter fix.” The structural issues in question are:

• Rebuilding its enterprise SSD business.
• The “secular decline in high GM end market of flash memory cards.”
• A technology lag in 3D NAND.

Consequently, Van Hees is modeling a miss for the quarterly results and guidance. Management guided second quarter revenue in the $1.15 billion to $1.225 billion range (which implies an 8 to 14 percent quarter-over-quarter decline), while the firm projects sales of $1.172 billion.

Earnings are expected to come in at $0.32 per share, below consensus of $0.33 per share. The estimate seeks to reflect “a mix shift to lower GM flash cards to China handset market."