SanDisk Corporation (NASDAQ: SNDK) has had a very difficult 2012.  Being the independent flash memory leader at a time when smartphones and tablets are taking over would theoretically be a good thing.  It has not been good for SanDisk.  But there may be some help on the way if an analyst has the call right today.  Our question is not just one research call, but how that would pertain to peers and competitors in flash and disk drives.

Pacific Crest initiated coverage on SanDisk with an “Outperform” rating and it set a $47.00 price target.  The stock closed at $31.66 on Monday and that implies almost 50% upside the price target (48.4% to be exact).  What is interesting is that the consensus price target objective from Thomson Reuters is $44.13.  That means that this much upside is not way out of line.

The report from PacCrest sounds even better than the 48% upside because it says that it trades at a 70% discount to its asset value.  Another boost is that the cost versus performance measure is coming in-line now for growth at “just 10-times” that of traditional hard drives of similar size and the cost of flash is falling at about 30% per year.  If the report is correct, solid-state drives could become 25% of the company’s sales in the next two or three years versus only about 3% last year.

Seagate Technology PLC (NASDAQ: STX) and Western Digital Corp. (NASDAQ: WDC) are the primary targets here when you consider the virtual duopoly in hard-disk drives.  The single-state drives could add pressure to the hard-disk drive sector ahead.  That has been an ultimate fear for the last 5 years and that is why the forward earnings multiples are so low.  Seagate trades at barely 3-times expected earnings and Western Digital trades at just over 4-times expected earnings for this year with growth expected in 2013 as well.

Today’s report on SanDisk may also hold a silver lining for the troubled Micron Technology Inc. (NASDAQ: MU).  The company has been making more efforts to drive toward flash memory and solid-state drives. Its stock is up 2% at $5.50 against a 52-week range of $3.97 to $9.16.

The PacCrest call has SanDisk investors and traders excited.  Its shares are up 5% at $33.25 and its 52-week range is $30.99 to $53.46.

We recently highlighted the “value in semiconductors after the recent fall” but we cannot help but warn that investing in chip stocks (and tech stocks) in the summer can often be painful if you get your timing wrong.

JON C. OGG

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