Sandisk Inc. (NASDAQ: SNDK)
Sandisk stock gapped higher yesterday on continued talk of a deal with Western Digital (WDC). According to a Bloomberg report, the companies are in advanced negotiations for WDC to acquire Sandisk in an all cash deal valued between $80 and $90 per share. A deal could come as early as this week, and if completed it would add to the already record breaking M&A activity in the semiconductor sector in 2015. Bloomberg News
Western Digital is the leader in the hard disk drive market, but that sector is expected to remain relatively flat over the next several years. An acquisition of Sandisk would give WDC a combined 28% share of the solid-state drive market, which is forecast to grow by 12% – 13% for several years.
Analyst Harlan Sur believes that Western Digital’s potential acquisition of SanDisk would make “strategic sense” given “SanDisk’s attractive flash memory assets including strong enterprise (SAS/SATA/PCIe), client and retail product portfolio.” Yahoo Finance
SNDK Technical Analysis
SNDK gapped up more than 13% in after-hours trading on Monday reaching a high of $81.64 after the Bloomberg report was published. But that move was on very low volume indicating retail, not institutional trading activity. Yesterday, the stocked opened at $77.41, a 7.5% increase from prior day close of $72. SNDK is trading near its highest level in seven months and it sits in the middle of the gap down from March 26, but it did close the daily gap today and that is a sign of weakness. The stock has some potential catalysts but price action shows indecision.
The company reports Q3 earnings after hours on Wednesday, so we may see some trading levels during the day. I believe that it is not a coincidence that the Western Digital buyout info gets floated during the week of quarterly earnings report.
SNDK established distinct levels today. The stock is in play so the levels act as both support and resistance and tell you if it’s a short, long, or not trading. On the lower support side I would be bearish if the stock trades below the $75.19 close. On the long side a push thru 75.50 and 76.40 are bullish. Given the sector and the news, this is not an easy stock to trade. If you get involved, watch it closely
SNDK Company Profile
SanDisk Corporation provides flash storage solutions. The Company designs, develops and manufactures data storage solutions in a variety of form factors using flash memory, controller, firmware and software technologies. The Company’s solutions include a range of solid state drives (SSD), embedded products, removable cards, universal serial bus (USB), drives, wireless media drives, digital media players, and wafers and components. The SSD products are used in enterprise data centers and client computing platforms. Its embedded flash products are used in mobile phones, tablets, computing platforms, imaging devices and automobiles. The Company’s removable cards are used in a range of applications, such as mobile phones, tablets, digital cameras, gaming devices, personal computers (PC) and automobiles. It also offers software solutions, which are used in conjunction with flash storage products. Google Finance