SanDisk (SNDK) Stock Tumbles on Lower Revenue Forecast

Shares of the SanDisk Corporation (SNDK) dropped -10.13 or -9.39 percent to $97.70 in pre-market trading this morning, after the company announced disappointing earnings despite beating analyst expectations by a small margin. Investors have seen the company significantly beat analyst expectations in the last eight quarters. SanDisk stock closed at $107.83, up +2.27 or +2.15 percent in Wednesday's regular trading session.

Milpitas, California based SanDisk Corporation is an American/Israeli company founded in 1988 by Sanjay Mehrotra, Jack Yuan and Eli Harari, three specialists in non-volatile memory technology.

The company specializes in the development and manufacture of flash memory storage products and software. SanDisk had its initial public offering in 1995 and sells its products in over 260,000 retail outlets in more than 100 countries worldwide.

SanDisk reported a +4.6 percent rise in GAAP earnings to $274 million, or $1.14 per share, versus $262 million or $1.06 per share in the same period last year. Non-GAAP earnings came to $329 million or $1.41 per share, versus $299 million or $1.22 per share in 2013's second quarter, while revenue was $1.63 billion.

The analyst consensus for SanDisk's second quarter earnings was $1.39 per share on revenue of $1.6 billion. The company continues to make the bulk of its income from removable flash drives, which along with USB drives accounted for as much as 40 percent of total revenue in the second quarter.

Sanjay Mehrotra, President and Chief Executive of SanDisk said in a press release, "We are pleased to deliver record second quarter revenue in both enterprise and client SSDs, as well as retail products," SSD solutions comprised 29 percent of our second quarter revenue, compared to 16 percent in the year ago quarter, demonstrating strong progress in driving our strategic priorities. Our results position us well to deliver another record year in 2014."

In addition to releasing several innovative products in the second quarter, SanDisk will be acquiring PCIe hardware and software company Fuision-io (FIO) for about $1.1 billion in cash. The deal, which is expected to close in this year's third quarter, will give SanDisk access to Fusion-io's customer base and give the company higher gross profit margin potential.

At the same time as its earnings release, the board of directors of SanDisk also declared a cash dividend for the third quarter of $0.30 per each common share. The dividend is to be paid on August 25th, 2014 to shareholders of record at the close of business on August 4th, 2014.

Despite the positive numbers, SanDisk stock is down significantly in Thursday's pre-market mostly due to its forecast for third quarter revenue. The company forecast revenue of $1.68 billion to $1.73 billion, falling short of the analyst consensus of $1.74 billion. Margins were also expected to decline to 47 percent from 48 percent.

After hitting an all-time high of $108.77 in Wednesday's regular trading session, SanDisk stock retreated to close at $107.83 and subsequently got pummeled in yesterdays' after hours and today's premarket. Nevertheless, the stock is still up over 50 percent year to date and after this initial selloff could resume its uptrend.

Other News About SanDisk
SanDisk Announces Expiration of HSR Waiting Period for Proposed Acquisition of Fusion-io
Waiting period for anti-trust review expired on July 15th.
SanDisk Upped to Strong Buy on Positive Estimate Revisions
Zacks Investment Research strongly recommends SanDisk stock.

Other Stocks in the News
Microsoft says to cut up to 18,000 jobs
Company will cut 14 percent of its workforce.
Morgan Stanley says 2Q profits more than double
Company reports strong results in investment banking and money management divisions.

Published on Jul 17, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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