SanDisk Corporation Stock Dives After Earnings

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SanDisk Corporation (NASDAQ:SNDK) reported better-than-expected financial results for the second quarter, but investors seemed unimpressed because the stock price of the company is plummeting today.

The shares of SanDisk Corporation (NASDAQ:SNDK) are trading at $93.79 per share, down by more than 13% at the time of this writing around 1:37 in the afternoon in New York.

The company reported Non-GAAP earnings of $329 million or $1.41 per share compared with $299 million or $1.22 per share in the same period last year. Its revenue increased 11% to $1.63 billion.

Reason behind Sandisk’s stock decline

The main reason behind the decline of the stock price of SanDisk Corporation (NASDAQ:SNDK) was its revenue guidance for the third quarter that is lower than the estimates of Wall Street analysts.

SanDisk Corporation (NASDAQ:SNDK) expected to achieve third-quarter revenue in the range of $1.68 billion to $1.73 billion as the company’s capacity fails to meet total market demand.

The company’s third-quarter revenue outlook is lower than the $1.74 billion Street estimate.

SanDisk Corporation’s (NASDAQ:SNDK) gross margin is expected to remain in the range of 47% to 49%. The company’s strongest sequential growth is expected from iNAND and custom embedded products.

Analysts cut estimates/ price target

In a note to investors, Stifel analysts Kevin E. Cassidy and Dean Grumlose commented, “In our view, the NAND Flash market demand remains robust. We expect SanDisk to continue adjusting its product portfolio towards higher value markets. Management reported record revenue in client and enterprise SSDs, contributing 29% of quarterly revenues. Embedded products contributed 19% of revenues, with some weakness noted at certain high-end smartphone customers.”

The analysts lowered their non-GAAP earnings estimate for SanDisk Corporation (NASDAQ:SNDK) from $1.59 to $1.50 per share and revenue from $1.76 billion to $1.7 billion for the third quarter.

Cassidy and Dean have a $114 per share price target for the shares of Sandisk Corporation (NASDAQ:SNDK). They also identified potential risks for the stock including NAND flash supply outstripping demand, execution delays in transitioning to next process node and decline in royalty revenue.

On the other hand, Goldman Sachs analyst Mark Delaney also lowered his price target for the stock from $107 to $100 per share.

According to Delaney, “We believe it will be difficult for the stock to outperform in the near term given that SanDisk is supply constrained in 2H14, and 1Q is seasonally slow.”

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