SanDisk Corporation Earnings: Can Data Storage Keep Soaring?

On Wednesday, SanDisk (NASDAQ: SNDK) will release its quarterly report, and investors have enjoyed the run in SanDisk stock that has taken share prices to record highs. Despite substantial competition from Micron Technology (MU -4.61%), Western Digital (WDC -3.32%), and other players in the storage market, SanDisk has done a great job of making products that consumers and enterprise customers alike want and need to bolster their productivity.

The technology industry is no stranger to successive booms and busts, and SanDisk has seen both first-hand. Even as the overall market recovered from the financial crisis, SanDisk and peers Micron and Western Digital hit a wall from 2010 to early 2013, with a vicious price war that hurt just about every player in the industry. Since then, though, consolidation and improving industry conditions have helped turn the tide for memory demand, and now, SanDisk has huge prospects for growth. Let's take an early look at what's been happening with SanDisk over the past quarter and what we're likely to see in its report.

Source: SanDisk.

Stats on SanDisk

Source: Yahoo! Finance.

Can SanDisk earnings keep up their momentum?
Investors have become increasingly excited about SanDisk earnings, raising their second-quarter estimates by a nickel per share and their full-year projections for 2014 and 2015 by 5% and 9% respectively. The stock has kept soaring, with gains of almost 35% since early April.

SanDisk's first-quarter report continued the storage-device maker's string of outperformance recently. Sales rose 13% from year-ago levels, and that led to a huge 62% jump in adjusted earnings. In particular, sales of solid-state drives jumped more than 60%, and the relatively strong pricing on those products helped lift gross margins to record levels approaching 50%. SanDisk also gave favorable guidance looking forward, suggesting that the good times for the industry could continue for a while longer.

This quarter, though, it'll be interesting to see if SanDisk sees some of its PC-based devices start to pick up steam. Recently, PC-chip giant Intel shocked investors by saying that PC demand had risen strongly, with many analysts pointing to the need to update Windows XP computers with newer alternatives as supporting sales of replacement desktop machines. SanDisk and Micron probably won't get the same boost that Western Digital will from that trend, as PCs still have more exposure to traditional hard-disk drives than the solid-state memory products that SanDisk and Micron have both ridden to recent success, but products like memory-sticks could see a brief rebound.

Source: Fusion-io.

Still, SanDisk's biggest future potential comes from flash memory, and the company has bet big on its continued strength. In June, SanDisk announced it would buy Fusion-io for $1.1 billion, which should give it even greater exposure to the enterprise solid-state market. With the big rise in cloud computing and the need to analyze ever-larger amounts of data, SanDisk has a big opportunity with the Fusion-io acquisition, especially given Fusion-io's emphasis on software that brings out the best in its hardware products. In addition, its brand new ULLtraDIMM flash-storage product could greatly accelerate speeds for users, by bringing memory closer to the parts of the computer that need the most access to it.

In the SanDisk earnings report, watch to see if the company can sustain its higher growth rates. With shares having risen as much as they have, leading to high valuations, SanDisk needs growth to continue in order to justify further increases for its stock.

Click here to add SanDisk to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.