SanDisk: Analyst Day Preview (25.13 -0.71) -Update-

Friday, February 22, 2008

SNDK will be holding its Analyst Day next Monday, Feb 25, with a conference call beginning at 10:30 E.T. We note that SNDK recently reported Q4 results on 1/28, with upside EPS and in-line revs. At that time the co issued downside Q1 rev guidance ($775-875 mln vs $1.01 bln consensus at the time), and in-line FY08 rev guidance (FY08 rev growth of 15-25%, or roughly $4.48-4.87 bln vs $4.82 bln consensus... The co doesn't typically issue financial guidance at their Analyst Day. However, the company may provide its forecast, in percentage terms, for pricing and ASP's for the year. At last year's event, SNDK forecasted at least a 55% price decline for FY07. Additionally, the company may provide its long-term outlook for CAGR terabyte growth... The following analysts made comments ahead of Monday's event: Amtech says following last year's "kitchen sink event", where the company did everything but downgrade its own stock, they believe this year's event will be more positive. Firm says the demand side of the equation has improved as we move closer to more meaningful SSD adoption, combined with AAPL doubling capacity per device without a price increase. However, the supply side remains concerning with I.M.F.T. ramping, Samsung and Hynix adding bits in a market share battle, and densities continuing to ship lower than they would expect given ASP declines... Caris is expecting an upbeat tone with focus on market growth opportunities, cost reduction plans, and the recently expanded joint venture agreement with Toshiba. However, weakening end markets are likely to exacerbate existing oversupply in NAND, which will cap profitability and drive further downside risk to estimates and the stock. Firm expects mainstream NAND pricing to decline 35% Q/Q in 1Q08, and continue to fall through the remainder of CY08... Lazard expects this analyst day to be different from 2007, which largely had a negative tone. Firm believes SNDK will mainly focus on NAND end markets, cost reductions, and the roadmap for the new fab. Firm's channel checks suggest that Q1 pricing will remain challenging and that the qtr is tracking toward the low end of the range. However, despite the negativity on the NAND market and U.S. retail, firm believes the stock has largely priced in these factors... The stock is currently hovering around multi-year lows, with short interest at approx 6% of float. After plummeting over 55% since the middle of last year, shares have stabilized around the $25-$28 level, with much of the bad news apparently priced in. For shares to move higher, mgmt would likely need to provide a better than expected outlook for NAND pricing in '08, and a more upbeat tone and commentary regarding U.S. retail and consumer.