This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why SanDisk Stock Will Flash to $130 After Pick-Off of Fusion-io

Stocks in this article: SNDK FIO FB HPQ AAPL STX AVGO IBM

NEW YORK (TheStreet) – With shares of SanDisk (SNDK) now resting near 52-week highs, investors are biting their nails trying to decide if they'll ever get a better chance to sell. But that shouldn't be a concern unless you need the money right away. SanDisk should be in good shape for years to come.

SanDisk management has placed the company on an accelerated path to become the name in enterprise solid-state drive storage on the heels of the company's recent acquisition of Fusion-io (FIO).

With the accretive potential for double-digit earnings per share starting in 2015, plus prospects for long-term enterprise revenue growth, SanDisk will be on solid ground for many years. And the stock now has the potential to reach $130 in the next 12 to 18 months -- even though shares are up 45% year to date and 175% over the past two years.

Investors are too preoccupied dissecting the value of the Fusion-io deal. The talking points focus on whether SanDisk's 21% premium was too much or too little.

None of that matters at this point. The more pressing question should be how much value the SanDisk management has created.

The 21% premium for a struggling company may seem like a lot. But investors are discounting Fusion-io's strong position with customers such as Facebook (FB), Hewlett-Packard (HPQ) and Apple (AAPL). Combined, these companies contribute to 61% of Fusion-io's total revenue.

The way I see it, the $1.1 billion all-cash deal -- which represents only 17% SanDisk's net cash balance -- will allow SanDisk gain a slice of the business from three of the largest enterprises in the world. At the same time, this deal accelerates SanDisk's ability to secure more enterprise business as demand for flash memory grows.

Neither SanDisk or Fusion-io could be reached for comment. But during the announced deal, SanDisk CEO Sanjay Mehrotra said,

“Fusion-io will accelerate our efforts to enable the flash-transformed data center, helping companies better manage increasingly heavy data workloads at a lower total cost of ownership.”

Mehrotra's comments were heard loud and clear by SanDisk rivals like Seagate (STX) and Avago (AVGO). They are beginning to understand the logic behind this move.

The deal is expected to close in the third quarter of this year.

When it does, SanDisk will be able to leverage its global scale to grow Fusion-io's sales in ways that that it would take Fusion-io itself decades to build. And it's only just begun. Over the next couple of years, the total addressable market for enterprise SSDs will grow to more than $8 billion, more than doubling the current market.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs