SanDisk Analysts Sees Both Risk And Upside Heading Into Earnings

SanDisk Corporation SNDK is scheduled to report its second quarter results after Wednesday's market close. Estimize is calling for the company to earn $0.36 per share (based on 28 estimates) in the quarter on revenue of $1.198 billion. This compares to the Wall Street consensus estimate calling for the company to earn $0.32 per share on revenue of $1.189 billion.

Here is a summary of what Wall Street's top analysts are saying ahead of the print.

Summit Research: ‘The Time Has Come To Buy'

Srini Sundararajan of Summit Research commented in a note in late June that recent SanDisk downgrades are "past their expiry date" and investors should look for a bounce in the stock.

Sundararajan noted that SanDisk's stock has "been a beaten down" stock for most of 2015 and right now most of the reasons that justify the decline in shares "are now in the rear-view mirror" and "most of the problems are on the mend."

Looking beyond the June quarter, the analyst stated that SanDisk's multiple has to "switch over" to fiscal 2016 estimates to arrive at a potential valuation. Currently, the Street is estimating an earnings per share of $4.49 next fiscal year which is "aided by buybacks" and easy comps between 2015 and 2016.

Sundararajan continued that SanDisk's remaining $2.2 billion in buybacks represents a "whopping" 16.2 percent of its market cap. The company should be "quite able" to fulfill its buybacks with its current cash on hand and 2016's free cash flow.

Shares were maintained with a Buy rating with a price target raised to $85 from a previous $61.

Susquehanna: Near-Term Earnings Power ‘In Question'

Mehdi Hosseini of Susquehanna Financial Group commented in a note in mid-June that his recent checks suggested raw NAND average selling prices in the second quarter "held up better than expected," though with increased concern on average selling price strength trends heading into the bottom half of the year.

With that said, Hosseini raised his second quarter earnings per share estimate to $0.35 from a previous $0.29 and also raised his third quarter earnings per share estimates to $0.74 from $0.71. However, the analyst lowered his fourth quarter earnings per share estimate to $1.01 from a previous $1.15, resulting in a lower full year and bottom half 2015 estimates.

Hosseini also noted that purchasing trends by end-customer within the Enterprise segments "continued to evolve" which made the analyst wonder if a raw NAND manufacturer and component vendor like SanDisk can ever "significantly" scale its Enterprise SSD and System revenues, which could be viewed as a headwind for gross margin expansion into 2016.

On the other hand, SanDisk's cost savings initiatives are expected to help with "some" leverage and operating margin expansion next year.

Shares were maintained with a Neutral rating and unchanged $60 price target.

Morgan Stanley: NAND ‘Solid,' Company Specific Headwinds ‘Intensifying'

Joseph Moore of Morgan Stanley commented in a note in mid-June that SanDisk is losing end market flexibility and will be forced to move to lower margin exposures in the short run.

According to Moore, the NAND market has "improved substantially" over the last three quarters, but during the same timeframe SanDisk had "very weak" earnings due to problems with its Enterprise strategy and execution challenges with its No. 1 customer, Apple Inc. AAPL.

Moore said that discussion with key customers, partners and competitors in Asia has left him "increasingly uncomfortable" that SanDisk can fix its problems. Specifically, after "consecutive setbacks" with Apple the last few quarters, the analyst is "not sure" where SanDisk supply is going to go. In addition, recovering the lost Apple SSD share will be "difficult" given a limited penetration outside of the company and Apple "may not be motivated" to qualify SanDisk in a mid-product cycle. As such, the company may be forced to explore lower margin segments.

Shares were downgraded to Equal-weight from Overweight with a price target lowered to $75 from a previous $80.

Wedbush: ‘Not An Overnight Fix'

Finally, Betsy Van Hees of Wedbush commented in a note in early June that a recent investor meeting with SanDisk's management team highlighted opportunities in client platform solutions.

Van Hees stated that she was "impressed" with the company's presentation and left the meeting "encouraged" by SanDisk's focus on right sizing its business and long-term growth opportunities. However, the analyst added that this is "not an overnight fix" and 2015 will remain a "challenging" year for the company.

Shares were Neutral rated with a $52 price target at the time of the note's publication.