Wedbush's Betsy Van Hees: Not So Fast SanDisk Bulls...There's Downside Risk On 'Multiple Variables'

In a report published Thursday, Wedbush analyst Betsy Van Hees maintained a Neutral rating on SanDisk Corporation SNDK, with a price target of $50. SanDisk reported robust 2Q results on the back of higher revenues and an improved product mix. The company's 2Q revenues and pro forma EPS of $1.24 billion and $0.66, respectively, were ahead of market expectations. Gross margin declined by 120 basis points to 41.9 percent from 43.1 percent. SanDisk reiterated its full-year revenue guidance of $5.4B-$5.7B, down 19-14 percent on a year on year basis, while guiding to 2H pro forma gross margin of 40-43 percent. Analyst Betsy Van Hees pointed out that the achievement of the company's 3Q and full-year guidance was dependent on the achievement of multiple variables. SanDisk's guidance is based on "consecutive quarters of mid-double digit revenue growth," several customer qualifications and "market share gains in price sensitive client SSDs," Van Hees said. Stable NAND supply demand, strong retail sell-through in weakening macro conditions and the timing of mobile customers' ramps and success of their respective products are the other driving forces for the company's performance in the current year, the report stated. The pro forma EPS estimates for FY15 and FY16 have been raised from $2.61 to $3.17 and from $3.70 to $3.76, respectively.