SanDisk (SNDK) shares set a fresh 52-week low Tuesday, as the maker of flash chips was the subject of another bearish Wall Street note.
Pacific Crest Securities analyst Kevin Vassily cut his financial estimates for SanDisk's second quarter and 2008 year, citing a market "awash in supply" of flash chips that has led to rock-bottom prices and is showing signs of lingering well into the future.
"As the NAND industry wrestles with oversupply, SanDisk is faced with falling prices and the difficulty or near impossibility of growing its market share," wrote Vassily.
Because SanDisk tends to discount chip prices less than its rivals, Vassily says that SanDisk is likely to wind up a market share loser in the current environment.
Worse, he says SanDisk is sending signals that it believes the current oversupply is not about to ease up any time soon.
Vassily writes that the company is likely to announce layoffs after it delivers its quarterly earnings report in July, and cites rumblings that SanDisk may seek to reduce its stake in a proposed flash manufacturing facility with
"A lower stake gives SanDisk the flexibility to purchase more NAND in the open market, and you would only want that flexibility if you thought the industry would be oversupplied, not undersupplied," Vassily writes.
Pacific Crest Securities makes a market in SanDisk shares.
Shares of SanDisk were off 5.4%, or $1, at $17.70 in midday trading Tuesday.
SanDisk's stock is down 47% so far this year, and is currently trading at its lowest level since June 2003, adjusting for stock splits.
Tuesday's negative note regarding SanDisk comes a couple of weeks after Citigroup downgraded the company's shares to hold from buy, citing weaker-than-expected demand.
, which produces NAND flash chips through a joint venture with
, reported a quarterly loss, due in large part to plunging flash prices, and said that NAND prices in the current quarter were already down 20%.
Chip stocks in general took a beating Tuesday, a day after the Semiconductor Industry Association reported encouraging global chips sales for May.
Philadelphia Stock Exchange Semiconductor Sector Index
, which comprises 18 semiconductor stocks, was down 1.6%.
Advanced Micro Devices
were among the many semiconductor stocks losing ground in midday trading.