Earnings Preview: SanDisk
SanDisk (SNDK) is expected to report Q2 earnings Monday, July 21 after market close, with a conference call scheduled for 5:00 pm ET.
Guidance
The consensus estimate is 13c for EPS and $909.26M for revenue, according to First Call.
Analyst Views
SanDisk, on its last earnings call, painted a negative picture for margins going forward. The company said product margins are expected to continue to be under pressure in Q2 with the anticipated benefit of low cost 43-nanometer and 3-bits per cell coming in the second half of the year. A weakening consumer market in the U.S. and China has dampened sell through in end-markets.
Since then, many of the analysts on the Street have been adjusting estimates lower to reflect a number of issues, most notably a NAND market oversupply. American Technology lowered its estimates on July 17 due to steeper near-term ASP declines and its belief that SSD adoption is more likely to occur in 2010. That same day, Cowen said that it believed SanDisk was not prepared to the degree of industry capex cuts and NAND oversupply that is confronting the industry. Cowen saw risk to consensus estimates and multiple compression and reiterated its Underperform rating ahead of Q2 results.
Additionally, on July 1, Pacific Crest cut its estimates for Q2, 2008 and 2009 on continued weak NAND pricing and sell through. PacCrest said that with the prospects for lower numbers, it believes further head count reductions are in the works and signal weakness may extend through 2H08.
Thomas Weisel expects SanDisk to report earnings below Street expectations and more in line with its Street-low estimates of 10c on $882.5M in revenue. Company guidance was 6c to 21c on revenues of $875M to $950M, down 8% to down 1 % QoQ. Weisel believes that sharp declines in spot NAND Flash pricing, which contracted 12% in 2Q, as well as sluggishness in demand drivers such as sales of digital cameras and handsets, represent key risks to their earnings estimates for SanDisk. For Q3, Weisel expects the supply/demand imbalance to continue, and therefore expects the company to guide below Street expectations. Weisel's revenue estimate of $1.081B is towards the low-end of Street's $1.04B to $1.24B range. The firm's non-GAAP EPS estimate of 36c compares to Street's 28c to 55c range, the mean at 40c.
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