Morgan Stanley: SanDisk Has 'Turned A Corner'

  • The share price of SanDisk Corporation SNDK has decline 45.56 percent year-to-date, from the high of $99.80 on December 30, 2014.
  • Morgan Stanley’s Joseph Moore has upgraded the rating from Equal-weight to Overweight, with a price target of $75.
  • Moore believes that the sharp pullback in the stock, along with the high level of M&A activity in the semiconductor segment, is likely to limit downside risk in the near term.

While expressing concern regarding SanDisk’s short-term fundamentals, Moore also mentioned that fundamentals were expected to improve over the next two to three quarters, which would then drive upside to the stock.

“We continue to be fundamentally cautious on the next six to nine months, given that NAND is modestly oversupplied during the peak seasonal build,” Moore stated, adding that following the 20 percent decline in the stock following the Q2 earnings report, “short term weakness is somewhat discounted and the stock is trading below its intrinsic value.”

Also, M&A and funding activity has been up in recent times, and with the continuing of the increased pace of consolidation, Moore expects investors to focus on SanDisk’s strategic value. This should prevent the stock from “reaching conventional trough levels.”

In addition, according to the Morgan Stanley report, “Sandisk has turned a corner in a tough environment, though some fundamental challenges remain. Sandisk posted upside in its 2Q vs. low expectations, and has gradually improved the exposure issues which caused the disastrous 4Q14 and 1Q15 results.”

Moore expects the company to witness sharp bit growth in Q3 and Q4, which would in turn lead to significant decline in costs, partly offsetting the weaker pricing environment expected in 2H15.

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Posted In: Analyst ColorUpgradesAnalyst RatingsJoseph MooreMorgan Stanley
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