Thursday, April 21, 2011

SanDisk Corp. (NASDAQ: SNDK): Q1 Earnings Preview 2011

SanDisk Corp. (NASDAQ: SNDK), the world's largest flash-memory device maker, is scheduled to release its first-quarter earnings after the closing bell on Thursday, April 21, 2011. Analysts, on average, expect the company to report earnings of 99 cents per share on revenue of $1.26 billion. In the year ago period, the company reported earnings of 95 cents per share on revenue of $1.09 billion.

SanDisk Corporation designs, develops, manufactures, and markets NAND-based flash storage card products that are used in various consumer electronics products.

In the preceding fourth-quarter, the Milpitas, California-based company's net income was  $485 million or $2.01 per share, compared to $340 million, or $1.45 a share, in the year-ago quarter.  On an adjusted basis, the company earned $1.27 a share in the latest quarter. Revenue increased to $1.33 billion from $1.24 billion. Analysts, on average, expected the company to report earnings of $1.09 per share on revenue of $1.31 billion.

At its last earnings call in January, the company said that it expects its first quarter retail demand to be lower sequentially due to normal seasonality, and in our OEM channels, demand continues to grow. The company expects to be supply constrained for the first quarter, in part due to the fourth quarter power outage. The company said that it anticipates that price decline in Q1 will be relatively modest, including the impact of moving to higher average capacity. The company expects Q1 total revenue to be between $1.20 billion and $1.275 billion, including license and royalty revenue similar to the fourth quarter. For the first quarter, the company expects its product gross margin percentage to be similar to the fourth quarter, including the impact of utilizing some non-captive supply.

For the full year 2011, the company expects healthy supply demand balance in the industry. SanDisk's revenue forecast for 2011 is $5.3 billion to $5.7 billion, including license and royalty revenues similar to slightly higher than in 2010. The company expects gross margin in the range of 39 percent to 42 percent.

Global demand for flash memory has continued to remain strong, thanks to the introduction of a wide array of new handheld devices like smartphones, tablets, e-books. Analysts have noted that its stock is linked somewhat to Apple's (NASDAQ: AAPL), because Apple is such a voracious consumer of flash, which is found in iPads, iPhones and iPods. SanDisk sells removable flash-memory cards and supplies memory chips to Apple Inc., whose iPad, iPhone and iPod all use so-called Nand flash as their main storage for music and data. Apple’s new MacBook Air laptop, introduced in October 2010, also uses flash memory in lieu of a traditional hard-disk drive. SanDisk said in december that more computer makers are going to follow Apple Inc.'s example and offer machines with only solid state drives in the future, a transition that will benefit the flash-memory maker. Already, companies like EMC (NYSE: EMC) and IBM (NYSE: IBM) have thrown weight behind the technology. Moreover, SanDisk is also exploring the enterprise potential of SSDs. "

The company's stock currently trades at a forward P/E (fye Jan 2, 2013) of 10.94 and PEG ratio (5 yr expected) of 0.86. In terms of stock performance, SanDisk shares have gained nearly 25 percent over the past year.

Full Disclosure: None.
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