SanDisk Slumps as Earnings Plunge

NEW YORK (TheStreet) - SanDisk (SNDK) investors are waking up on the wrong side of the bed this morning, following a weaker-than-expected earnings report and several downgrades.

Sandisk reported first-quarter earnings of 46 cents per share on revenue of $1.21 billion, as pricing and demand weakness in certain segments continued to dampen results. Analysts polled by Thomson Reuters were looking for earnings of 67 cents per share on $1.21 billion in revenue.

Sandisk's President and CEO Sanjay Mehrotra noted that he expects the first quarter weakness to linger into the second quarter, but predicts an uptick in business in the second half of 2012. "We believe a seasonally stronger demand environment in the second half of the year, combined with our diversifying portfolio of mobile and SSD (Solid State Disk) solutions, will allow us to deliver strong sequential revenue growth in the third and fourth quarters," Mehotra said in the company press release.

Piper Jaffray analyst Jagadish Iyer cut his rating on the stock to "neutral" from "overweight," citing the weak earnings, as well as the lack of any near-term catalysts. "SanDisk indicated the supply/demand imbalance will continue in the second quarter of 2012, while hoping for stability in the second half of 2012," Iyer wrote in his research note. He lowered his price target from $51 to $35.

Deutsche Bank's Bob Gujavarty also cut his rating, lowering it to "hold" and lowering the price target to $35. "We believe SanDisk's disappointing first half of 2012 performance is a function of the company being focused on the wrong customers and the wrong markets. We note SanDisk has lost revenue share since 2008 and this share loss appears to be accelerating in 2012," Gujavarty mentioned in his note.

Shares of SanDisk are lower in early Friday trading, off 13.52% to $35.00. Shares have fallen 17.76% year-to-date.

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--Written by Chris Ciaccia in New York

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