Please ensure Javascript is enabled for purposes of website accessibility

Why SanDisk Shares Got Crushed Today

By Evan Niu, CFA - Jan 25, 2016 at 2:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The memory maker received a Street downgrade on fears that the Western Digital deal won't close.

What: Shares of flash memory specialist SanDisk (NASDAQ: SNDK) got crushed today, down by 11% as of 2:36 p.m. ET, after the company received an analyst downgrade regarding the pending merger with Western Digital (WDC -2.67%).

So what: CLSA downgraded its rating on SanDisk by two notches, from "outperform" to "underperform," while reducing its price target from $86 to $70. Analyst Mark Heller expressed some skepticism about both Western Digital's fundamentals as well as whether or not the deal will actually close. Heller estimates that there is a 25% chance that the deal will not go through.

Now what: Western Digital had announced a deal with Unisplendour last year, and the SanDisk deal potentially puts the Unisplendour investment at risk. If Unisplendour walks away, there is some concern that Western Digital shareholders would not approve of the SanDisk acquisition due to difficult NAND market conditions. Ever since the deal was announced, SanDisk shares have traded at a significant discount to the $86.50 per share offer price, showing that investors have been skeptical all along -- and rightly so.

Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool owns shares of Western Digital.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Western Digital Corporation Stock Quote
Western Digital Corporation
WDC
$46.31 (-2.67%) $-1.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
379%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.