SanDisk Disappoints, Stays A Sell

SanDisk (SNDK) is the largest supplier of flash storage card products based on NAND technology used in digital cameras, multimedia cellular phones, USB flash drives, and a growing variety of other digital consumer devices. SanDisk reported disappointing Q3 earnings results due to negative product gross margin and excess inventory.

We expect the company’s earnings losses will be followed through the first half of 2009 even with substantial cost-cutting and restructuring efforts. We believe pricing is likely to remain weak until demand improves, which is not likely until the consumer spending picture strengthens.

We believe there is risk of further downside.  SanDisk does not expect any meaningful improvement through the first half of 2009. We therefore maintain our Sell rating on SNDK shares with a six month price target of $10.00.

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