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Growth in Flash Utilization Will Propel SanDisk Shares Higher

August 25, 2014 | About:

A global leader in flash storage solutions, SanDisk (NASDAQ:SNDK) released mixed results for the second quarter. The company saw growth in revenue due to good sales of SSD drives. But, SanDisk’s shares fell as investors didn’t receive the company’s results positively. SanDisk results couldn’t meet the consensus estimates. Also, on the back of a good performance in the last quarter, analysts were ideally expecting SanDisk to post a decent guidance, but it didn’t. However, management is optimistic about its growth in the future. Let us find out: Is SanDisk worth your dollars?

A closer look at the results

In the recently reported quarter, SanDisk’s revenue increased by 11% to $1.63 billion on a year-over-year basis. Further, on a non-GAAP basis, SanDisk’s net income was $329 million, which was more than $299 million as compared to last year.

SanDisk might be struggling as of now, but the stock has a good potential. This might be a seasonal weakness for it. As it is focusing on various aspects of profitability, investors have many reasons to be bullish of the stock. The company has a good track record on the stock market. The stock has been moving well on the exchange. SanDisk is laser-focused on improvement and it’s making significant investments. This should help SanDisk to still hold a competitive edge over its peers.

Opportunities ahead

Flash storage utilization is increasing every day. SanDisk is looking forward to benefit from this rising growth opportunity. It is targeting a broad range of customers who are engaged in utilizing flash storage. It is making good innovations in its product offering to strengthen its product portfolio. The success is clearly evident in its fast-growing SaaS and SATA products which have also contributed a good 30% to the enterprise SSD revenue on a year-over-year basis. Another exciting thing for the company is that its Cloud speed and other SATA SSD products are qualified at multiple hyper-scale customers and SanDisk is seeing good traction for them in the market right from the initial phase of their launch.

Moving further, the company has introduced many additions to its SaaS solutions. It has been introducing new and high density storage devices. For example, its 2 terabytes Optimus Eco SSD and recently announced lightning 12-gigabit SaaS SSD and 4 terabyte Optimus MAX SaaS SSD are moving really well in the market and are expected to extend SanDisk’s offering in this storage business, strengthening its position in the industry.

The attractive thing for the customers with the new offering is that its 4 terabyte MAX SaaS SSD is better than the traditional storage device and has managed to out space legacy 15K and even 10K RTM hard-disk drive in mission-critical storage and data center applications. The company is expecting these new products to add meaningful revenue to it in the coming days.

More strategies

Further, SanDisk has also undertaken many other strategies. The company has confirmed the acquisition of Fusion-io. With this acquisition, SanDisk is focusing on penetrating the PCIe hardware and software solutions. This will again strengthen SanDisk’s market presence, leading it to transform into a value-added service provider. This will enhance its customer base, explore new channels and market penetration.

In the client SSD market, SanDisk has introduced SanDisk Extreme PRO which is gaining a lot of traction from customers. This offering has many special features that have become attractive points for customers. This high performance comes with 1 terabyte capacity, and it is the industry’s first ever 10-year warrantee device. The company is ramping up its investments in product technology which will help it to secure a respectable position in the Client SSD space. The company is also pleased with the growing attached rates of SSDs to notebook computers, particularly in corporate PC platforms.

It is also seeing good growth in its business with the Chinese mobile device manufacturer. This is leading SanDisk to see handsome growth in the revenue in this market. SanDisk is seeing further ramp up in its revenue with the expansion of it mobile offering for mid and entry level smart phones and tablets. Out of its two embedded offerings, iNAND and X3, the latter is expected to be a key growth driver for SanDisk in future as it is seeing robust demands.


With a trailing P/E of 19, SanDisk appears reasonable as of now, and also its forward P/E of 13.69 shows that its earnings are expected to grow at a steady space. SanDisk is a good long term holding as its future five year growth rate is impressive with a CAGR of 25%. So, an investment in SanDisk will be a good bet for investors seeking long term gains.

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