On Dec 12, 2014, we issued an updated research report on SanDisk Corporation (SNDK) following the company's third-quarter 2014 results.
SanDisk posted mixed third-quarter results, with the top line missing the Zacks Consensus Estimate, while the bottom line beating the same. Although the company’s adjusted earnings of $1.31 per share surpassed the Zacks Consensus Estimate of $1.20, it declined 13% from the year-ago quarter. The decline was mainly due to higher cost of sales as well as operating expenses.
However, total revenue increased 7.5% on a year-over-year basis to $1.746 billion, which came ahead of management’s guided range of $1.675–$1.725 billion. The year-over-year revenue growth was primarily attributed to strong demand in both client and enterprise SSDs. However, the top line missed the Zacks Consensus Estimate $1.760 billion.
Moreover, the company provided tepid fourth-quarter revenue guidance. Further, declining price per gigabyte, primarily due to unfavorable product mix, could impact the company’s results.
Going forward, lackluster PC sales, competition from Micron Technology Inc. (MU) and currency fluctuations remain the headwinds.
Nevertheless, we remain optimistic about the stock’s future performance due to its strategic endeavors such as acquisitions and expansion of product offerings which are aimed to drive top-line growth. Moreover, management’s commentary of a turnaround in the quarters ahead and strong secular demand for its storage products are the positives.
It is also worth mentioning that Apple Inc. (AAPL) is currently a major customer of SanDisk. Hence, we believe that price and cost benefits as well as a long-term NAND supply agreement with a company like Apple will help SanDisk to outperform the NAND market.
Currently, SanDisk has a Zacks Rank #3 (Hold). A better-ranked stock in the technology sector worth considering is Ambarella Inc. (AMBA) sporting a Zacks Rank #1 (Strong Buy).
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