B. Riley Upgrades SanDisk To Buy Following Q2 Results

In a report published Thursday, B. Riley analyst Craig A. Ellis upgraded the rating on SanDisk Corporation SNDK from Neutral to Buy, while raising the price target from $60 to $75. Although shares rose following the company's Q2 outperformance, the analyst believes that there could be intermediate-term upside.

Following two consecutive quarters of missing expectations, SanDisk posted its 2Q15 result ahead of the estimates, with the sales and EPS meaningfully beating the consensus forecasts. The analyst believes that the results were driven by the mix shift and pricing during the quarter.

Opex also declined, driven by successful execution of cost reduction initiatives, while the company undertook "healthy" share buybacks. The analyst expects the intensity of share buybacks to continue in Q3 and Q4.

While the 3Q15 guidance was robust, the analyst believes that quarter-on-quarter growth now appears more achievable, given the Q2 sales upside.

"In addition, with confirmed Consumer SSD share gain, Enterprise SSD's tracking better, and inventory replenished to better meet available demand there's less pressure on Embedded Mobile to drive the growth story," Ellis stated.

Contrary to expectations of the C15 guidance being lowered, the SanDisk maintained its sales, gross margin and opex guidance for the year. "Simply put, signs of stabilization and re-acceleration are 1-2 quarters ahead of our prior expectation which means more sustained yy segment growth may be possible by early-1H16," the B. Riley report said.

The EPS estimates for C15 and C16 were raised from $0.65 and $0.62 to $3.33 and $4.70, respectively.