Needham & Company Sees SanDisk (SNDK) Multiple Contraction and Continued Pressure on Shares

Needham & Company analyst Rajvindra Gill weighed in on SanDisk (NASDAQ: SNDK) after the company lowered Q1 results. The firm expects multiple contraction and continued pressure on the shares.

Gill commented, "This morning, SNDK lowered its 1Q15 sales target and removed its annual guidance, citing product qualification delays, lower than expected sales of enterprise products, and lower pricing. When we downgraded the stock on 1/12 ($97.04) we saw several structural challenges facing SNDK, which we think will persist: 1) unfavorable mix with 1/3 of revenue from removable products, where pricing is fierce; 2) a lack of mobile DRAM solution impeding growth in the China handset market as eMCP adoption accelerates; and 3) NAND GMs of 45% that are unsustainable relative to competition (+1500 bps higher). Our ests for '15/'16 decline materially. We anticipate significant P/E multiple contraction (from peak of 16x to trough levels of 8-10x), and hence continue pressure for the shares."

The firm is lowering FY15 / FY16 ests to $4.00 and $4.35.

For an analyst ratings summary and ratings history on SanDisk click here. For more ratings news on SanDisk click here.

Shares of SanDisk closed at $81.18 yesterday.

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