Why SanDisk (SNDK) Stock Is Gaining Today

NEW YORK (TheStreet) -- SanDisk (SNDK) shares are up 2.9% to $103.17 on Thursday after analysts at Morgan Stanley (MS) reiterated the stock's "overweight" rating and $115 price target.

The firm believes that Apple's (AAPL) increase in its phone's NAND flash memory will have a positive effect on SanDisk's long term prospects.

"Apple's increase in NAND per phone has material (but small) short term impact to NAND suppliers, but big long term impact. 67% lower price per GB to consumers will increase NAND use in Apple and Android devices, providing a long awaited source of demand elasticity, without major price declines," said the firm.

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TheStreet Ratings team rates SANDISK CORP 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SNDK's revenue growth has slightly outpaced the industry average of 9.3%. Since the same quarter one year prior, revenues rose by 10.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although SNDK's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average. To add to this, SNDK has a quick ratio of 1.88, which demonstrates the ability of the company to cover short-term liquidity needs.
  • SANDISK CORP has improved earnings per share by 7.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SANDISK CORP increased its bottom line by earning $4.37 versus $1.69 in the prior year. This year, the market expects an improvement in earnings ($5.92 versus $4.37).
  • The gross profit margin for SANDISK CORP is rather high; currently it is at 51.45%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 16.76% trails the industry average.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 64.73% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: SNDK Ratings Report
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