Cowen Lifts PT on SanDisk (SNDK) to $70; Questions Still Remain Following Q4 Results

(Updated – January 23, 2014 9:54 AM EST)

Cowen keeps SanDisk (Nasdaq: SNDK) at Market Perform, but raises its price target from $64 up to $70.

Analyst Timothy Arcuri comments, While the guidance certainly does leave room for upside moving through 2014, it is consistent w/our call that we have likely just seen the gross margin peak. Given what has been a very strong stock/margin correlation, the historical playbook would be to sell now. We are certainly skewed more cautious versus most on the Street on this stock but there are still some important Qs to answer before quite yet making a louder negative call. These include: 1) if and when Hynix will bring M12 capacity back to NAND; 2) Samsung’s degree of success w/3D NAND (we continue to feel this presents great longer-term technology risk for SanDisk); and 3) SanDisk’s ability to qualify TLC in PC client SSD and gain enterprise SSD share (where Smart should help) to offset the ASP pressure from PC client.

The following is a 10-year chart of SanDisk’s stock price versus gross margin issued by Arcuri:

SNDK Stock Price vs. GM

FY14 EPS estimate moves from $5.22 down to $5.08 and FY15 EPS from $4.15 to $4.47 on a little less draconian view of margins and some more revenue from SanDisk’s aggressive push into enterprise SSD.

For an analyst ratings summary and ratings history on SanDisk click here. For more ratings news on the company. click here.

SanDisk closed at $72.19 yesterday, with a 52 week range of $46.78 – $74.14.


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