SNDK: Nomura Pounds the Table on Flash Prices, SSD Sales

Nomura Equity Research‘s Sidney Ho today reiterates a Buy rating on shares of NAND flash memory chip technology maker SanDisk (SNDK), while raising his price target to $60 from $55, in advance of the company’s Q1 earnings release on April 17th, writing that the stock can go higher despite beating the S&P 500 Index this year, as estimates rise.

SanDisk stock fell 13 cents to $54.42 today, and are up 25% this year versus at 10% rise in the S&P 500.

Ho raised his own 2013 estimate to Revenue of $5.71 billion and EPS of $4.25 from a prior $5.5 billion and $3.50 per share. He raised his 2014 view to $6.19 billion and $5 from a prior $4 per share.

Ho cites several factors, including the weakening of the Japanese Yen from 88 to the U.S. dollar to 95 to the U.S. dollar since January:

Spot prices [for flash memory chips] have been unusually stable and in fact saw a slight uptick in March. Micron [Technology (MU)] recently reported its NAND ASP declined only 1% in its Feb-13 quarter and expects prices to decline slightly in the May-13 quarter. We attribute the strength to limited supply growth, while NAND suppliers continue to move bits from low-margin memory card business to higher-margin solid state drive businesses. We expect demand to improve in Q2 given the new iPhone will likely launch in the next few months. Furthermore, our field checks suggest that SanDisk�s SSD sales have picked up, with price increase toward the end of the quarter. While PC and Ultrabook sales have been disappointing, we believe SanDisk is gaining share in SSDs given limited supply available to non-vertically integrated SSD suppliers, as well as some competitors (e.g. OCZ) backing away from the low-end SSD market. As such, we expect SSD to continue to increase as a percentage of SanDisk�s sales, up from 10% in 4Q12.

Note that RBC Capital‘s Doug Freedman, who has been following NAND spot pricing weekly, today wrote that “Spot pricing is up-ticking again (from +1% to +4% w/w) across all densities, which explains today�s outperformance in SNDK and MU vs. semiconductor peer group.”

Continues Freedman, “We do suspect that 2H March NAND contract pricing could be up in the mid-to-high single digits based on the movement in spot pricing.”