Skip to main content

SIA Forecast strengthens case for SanDisk

As we head into the close today, SanDisk (SNDK) is trading well under $40 per share. It is in the vicinity of the lowest prices it has seen in the past two years. It was last at this level in July 2006 and then again in March 2007. It now has a forward PE of about 15 and a PEG ratio of 1.03. These indicators suggest that SanDisk is reasonably priced.

Recap: why the shares have been beaten down --

Earlier this week, market research firm iSuppli downgraded its rating on near-term conditions for suppliers of NAND and DRAM memory chips to "negative" based on expectations that the average selling price for 512 Mbit NAND will drop 24% in the fourth quarter, to 46 cents from 60 cents, after having seen price increases in the previous two quarters.

Last month, Needham and Oppenheimer both downgraded the stock when shares were up around $48. Their message was that supply from competitors looked to increase and pricing could weaken. There were also questions on how solid demand appeared to be going forward. Yet the downgrades came only two weeks after a report by EETimes magazine saying Toshiba's NAND supplies were sold out through December. Toshiba and SanDisk are joint-venture partners in a semiconductor fab in Japan.

Is there a catalyst that would prompt a buy signal?

Today, the Semiconductor Industry Association released their prediction of global semiconductor sales growth for this year and next year. By far and away, Flash memory sales growth is projected to be higher than any other category of semiconductor. Looking at the CAGR for 2010, Flash comes in at 20% while at the other end of the spectrum, DRAM comes in at 1.5%. The remaining categories are distributed in a range between 5.5% and 9.1%.

Also mentioned in the SIA report, is the fact that growth has been driven by strong world-wide demand in consumer devices. This is a market segment where Flash is an important component and where we are seeing high rates of NAND bit growth.

With SanDisk still the preeminent player in NAND Flash memory, the SIA prediction could help put a floor under the share price. It is my opinion that buying SanDisk at the current level presents good opportunity with modest risk. In the last two years, the two times SanDisk traded down to the upper $30's, a strong rally followed. With tech stocks currently under pressure, SanDisk could even get a bit cheaper for those interested in taking a position.

Sources: SIA Forecast: Global Chip Sales Will Surpass $321 Billion in 2010

Disclosure: author is long SNDK as of late Tuesday


Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Trade Radar gets another update

Some of our data sources changed again and it impacted our ability to load fundamental/financial data. In response, we are rolling out a new version of the software: 7.1.24 The data sourcing issues are fixed and some dead links in the Chart menu were removed. So whether you are a registered user or someone engaged in the free trial, head over to our update page and download the latest version. The update page is here: Contact us if you have questions or identify any new issues.

Thursday Bounce: Trend Busters, Swing Signals and Trend Leaders for July 9, 2009

This is a quick post to announce that we have published Thursday's Trend Leaders, Swing Signals and Trend Busters at Alert HQ . All are based on daily data. Today we have the following: 72 Swing Signals -- A couple of days ago we had 35 signals, today we have twice as many. Happily, we now have 65 BUY signals, a mere 4 SELL Signals plus 3 Strong BUYs. Whoo-hoo! 56 Trend Leaders , all in strong up-trends according to Aroon, MACD and DMI. There are 18 new stocks that made today's list and 60 that fell off Tuesday's list. 48 Trend Busters of which 5 are BUY signals and 43 are SELL signals The view from Alert HQ -- Talk about mixed signals. If you look at our Swing Signals list you would think the market was in the middle of a big bounce. BUY signals are swamping the SELL signals and we even have a few Strong BUYs. Yes, there's a good sprinkling of tech stocks and tech ETFs but the distribution is pretty broad-based with a good number of different sectors represented, eve