Why SanDisk Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of SanDisk (Nasdaq: SNDK  ) sank 10% on Wednesday after the flash memory maker cut its first-quarter sales and profit forecast.

So what: SanDisk's warning is consistent with that of other flash memory makers, offering further confirmation that the sector is struggling. Booming demand for consumer gadgets has boosted NAND production in recent years, but now a glut in supply is leading to lower revenues and margins.

Now what: Expect the stock to remain volatile in the short term. SanDisk now expects first-quarter revenue of $1.2 billion, down from its prior view of $1.3 billion-$1.35 billion, and also sees gross margins below its previous forecast. Of course, given the long-term cloud computing and virtualization trends working in the company's favor, this might be a decent entry point for patient investors.

Interested in more info on SanDisk? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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