SanDisk was slammed today, despite having a terrific quarter. They beat estimates by 0.15 ex-items, but posted a loss for the 4th quarter from the acquisition costs of MSystems. SanDisk reported record earnings of over a billion dollars of revenue for the 4th quarter, far exceeding analyst expectations. However, they provided weak guidance for the 1st quarter of 2007 which caused investor confidence to slip.
However at these price levels, SNDK is a bargain -- it is trading at just over 2 times book value; not to mention SNDK's huge cash position. Also, at these price levels, SNDK may be a potential buyout target as well.
Also to note, 12 analysts recommend SNDK as a buy, and 11 rate it as a "hold." S&P rates SNDK at 4 stars.
In my opinion, I think the action today was an overreaction to the negative outlook given in the conference call -- these concerns about pricing pressures and shrinking margins have already been factored into SanDisk's guidance, as they gave a very conservative estimate for the 1st Q of 07.
Although SNDK fell as low as 38.20 after hours yesterday, it appears to be settling around 39.90-40.00.
As per my previous analysis on SanDisk, I said that I would wait until it hit 40.00 before entering, and I want to reiterate that.
As shorts begin to cover and profit-take at these levels, SanDisk should recover.
SanDisk is a definite buy between 37.34-40.00.
Under 37.34 however (its 52 week low), its behavior may become more irrational as technically it has no support until the 20's.
$39.83 (01/31/07)
