SanDisk Braces For Earnings (SNDK)

SanDisk Corp. (NASDAQ: SNDK) is set to report earnings today after the close.  While the company will have to compete for headline and eyeball interest against Apple, this is a key stock that many traders use to garner interest into the overall Flash Memory market.  It also competes by selling an MP3 player.

Earnings estimates from First Call are $0.13 EPS on just over $906 million in revenues.  For next quarter estimates are $0.36 EPS on $1.09 Billion, and for fiscal Dec-2008 estimates are $1.31 EPS and $4.22 Billion in revenues.

After this stock has slid two-thirds from 52-week highs, the average analyst targets are still between $27.00 and $30.00. Options traders appear to be braced for a move of up to $1.50 on in the money calls and over $2.00 in either direction based upon current out of the money options.  This does give us a decent range to use but the stock is between strikes and with last Friday being expiration we have an abnormal amount of time value put in with this event-risk.

At $17.99, shares are much closer to 52-week lows as we have a 52-week trading range of $16.02 to $59.75.  Sadly, if this share price holds we’ll essentially be looking at 5-year lows.

You can guess the culprit.  Sales keep growing as we all start using more and more consumer electronics that use flash memory, but margins continue to erode and erode.  DRAM and SRAM makers always promise leveling out of margins but this tends to be a commodity business that doesn’t see the same norm in commodity prices where the commodity can actually rise in price.

Jon C. Ogg
July 21, 2008