SanDisk Earnings Will Ride Tablet And Ultrabook Growth

SanDisk (NASDAQ:SNDK), a maker of solid state drive (SSD) memory, flash cards and USB flash drives, is due to announce its second quarter earnings on July 19. It has guided for lower earnings due to weak demand and a poor pricing environment. We expect the earnings to be better in the second half of the year due to seasonally higher demand in Q3 and Q4, improved demand for flash memory driven by tablets and ultrabooks, and SanDisk’s Extreme Pro microSDHC UHS-I which is claimed to be the world’s fastest memory card designed for HD cameras, tablets and smartphones.

See our full analysis on SanDisk

Outlook for 2012

The company has seen double digit y-o-y growth in the past few quarters’ earnings that have averaged around 15% growth. Though the outlook for the overall solid state device industry has been lowered, SanDisk is still likely to show solid growth based on greater demand for SSD from tablets and ultrabooks.

Solid state memory devices contribute about 28% to SanDisk’s stock price, and this division is likely to grow the most in 2012, according to our analysis. The pricing of NAND memory chips is likely to fall and this will lead to lower margins for this segment.

Tablets, Netbooks And Ultrabooks to Drive Demand

Solid state memory chips are experiencing increasing demand due to demand from tablet and thin client manufacturers as well as netbooks. Ultrabooks and ultra thin notebooks are also driving up SSD demand. As more companies move to cloud computing, demand for SSD drives from the server market will also rise. Increasing smartphone and digital camera adoption will also push up the sales of flash memory cards.

We estimate these factors will result in 2012 earnings to be slightly above the company’s new guidance. We currently have a $45.49 Trefis price estimate for SanDisk, which is around 35% above the current market price.

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