Analysts Simon Dong-je Woo and Jennifer Kim downgraded the NAND memory producer to "underperform" from "neutral." The analysts also lowered their price target to $65 from $75.
The analysts cited "worse-than-expected momentum" in the NAND market as a contributing factor to the downgrade. SanDisk faces increased competition from other NAND producers such as Samsung, Hynix, and Micron (MU). Prices of the chips may soon fall as high supply meets weaker demand, according to the analysts.
The analysts also lowered their estimated EPS for SanDisk. Woo and Kim now expect earnings of $4.53 a share in 2014, down from the previous estimated earnings of $7.01 a share for the year. They analysts also cut the EPS estimate for 2015 to $4.46 from $7.60. SanDisk is set to report fourth-quarter earnings Wednesday.
TheStreet Ratings team rates SanDisk as a "buy" with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate SANDISK CORP (SNDK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, good cash flow from operations and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 2.8%. Since the same quarter one year prior, revenues rose by 27.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although SNDK's debt-to-equity ratio of 0.12 is very low, it is currently higher than that of the industry average. To add to this, SNDK has a quick ratio of 2.49, which demonstrates the ability of the company to cover short-term liquidity needs.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Computers & Peripherals industry. The net income increased by 261.9% when compared to the same quarter one year prior, rising from $76.51 million to $276.86 million.
- Net operating cash flow has significantly increased by 198.90% to $382.41 million when compared to the same quarter last year. In addition, SANDISK CORP has also vastly surpassed the industry average cash flow growth rate of 6.77%.
- The gross profit margin for SANDISK CORP is rather high; currently it is at 53.53%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 17.03% trails the industry average.
- You can view the full analysis from the report here: SNDK Ratings Report