Hey yo!
SanDisk
What analysts say:
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Buy, sell, or waffle? Twenty-one analysts cover the memory maker. Twelve of them want to buy the stock, eight are holding until further notice, and one guy is piping up with a rebellious "sell." In our Motley Fool CAPS database, this is a habitual three-star stock based on 925 ratings from investors like me and you.
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Revenue. The average forecast calls for $790 million, up 10% over last year, but revised down from a cheerier $838 million expectation after the last earnings report. Management guidance outlines a range from $720 million to $825 million.
- Earnings. $0.15 per share is all Wall Street needs to see this time, albeit a severe step down from the $0.58 per share delivered a year ago. The company hasn't told us exactly what it expects on the bottom line.
What management says:
Management is keeping its collective chin up, and CEO Eli Harari wanted to use the last earnings report to highlight what's working. He was enthusiastic about an upcoming string of new products, and expected higher demand in the "seasonally strong back half" of the now-completed second quarter.
Hold that thought.
What management does:
SanDisk used to be the envy of its peers, sporting margins like nobody else and generally running a tight ship. But marketwide price cuts on Flash memory and the gadgets associated therewith have brought that high-flying excellence back to Earth, essentially leaving Apple
But have a look at the improving cash flow figures. They're not a mirage produced by shrinking revenue and stable cash -- sales have been skyrocketing just fine, thank you. Instead, the income tanked two quarters ago, when SanDisk acquired rival memory maker msystems and took a $186 million charge for discontinued in-process research. Back out that write-off, and SanDisk would have presented a $131 million profit for that quarter, rather than a $35 million loss. That intangible item does not affect cash flow figures.
|
1/2006 |
4/2006 |
7/2006 |
10/2006 |
12/2006 |
4/2007 |
|
|---|---|---|---|---|---|---|
|
Gross |
42.2% |
40.8% |
40.1% |
39.3% |
38.6% |
36.2% |
|
Operating |
25.0% |
23.4% |
23.0% |
21.9% |
20.1% |
16.2% |
|
Net |
16.8% |
14.0% |
13.9% |
12.9% |
6.1% |
4.8% |
|
FCF/Revenue |
15.0% |
9.8% |
8.6% |
10.7% |
12.9% |
18.5% |
|
Y-O-Y Growth |
1/2006 |
4/2006 |
7/2006 |
10/2006 |
12/2006 |
4/2007 |
|---|---|---|---|---|---|---|
|
Revenue |
29.8% |
34.6% |
39.5% |
35.2% |
41.3% |
38.0% |
|
Earnings |
44.9% |
25.0% |
34.1% |
11.2% |
-48.5% |
-53.0% |
One Fool says:
Management boosterism is clearly not the whole story. Computer memory is still overly abundant, which leads to lower selling prices. SanDisk said that it sold three times more megabytes of memory in the first quarter than it did a year earlier, but at a 62% lower average price per megabyte. Unless you can think of a way to manufacture these chips for free, that's an expensive way to grow sales by 17%.
The need to cut costs is real, and the company is doing what it can to that end. A 10% workforce reduction will send 250 people to the unemployment office, but should save SanDisk $30 million or more per year in operational costs. That's a start, but it's only a lightweight counterbalance to that massive price pressure -- and I, for one, need to see more than that to consider an investment here. Show me the money, SanDisk!
Fool contributor Anders Bylund holds no position in any of the companies discussed here. He is not a rapper, but you gotta do a little sump'n sump'n for the surfer dudes on San Fran Bay, yo. You can check out Anders' holdings if you like, and Foolish disclosure will help you find the road ahead.
