SanDisk (SNDK) is one of my favorite picks right now. It's a new year, which means new products. Good ones, which use flash memory.
1. 32 Gig Solid-State Drive (SSD)
While 32 Gigs isn't much, the benefits of a flash-based drive outweigh the small size, especially for business use. These drives will be available for laptops for an additional $600. Yes, it's expensive, but valuable. Here are the benefits:
- The drive consumes 40% the energy of a conventional hard drive, giving laptops 10% longer battery life.
- The speed of applications will be dramatically increased.
"random read rate of 7,000 inputs/outputs per second (IOPS) for a 512 byte transfer, more than 100 times faster than most hard disk drives. Taking advantage of this performance, a laptop PC equipped with SanDisk SSD can boot Microsoft Windows
- No matter what speed processor or how much memory a computer has, it is limited by the speed of a hard drive when loading applications. The SanDisk SSD removes this limitation.
- Flash-based drives are much more reliable than conventional drives. Working as a computer technician, I have witnessed corrupt hard drives as being the most common problem people have with laptops. People will be willing to pay a premium for the security of knowing that their data will be safe. If consumers are willing to pay several hundreds of dollars for warranties, they will be willing to pay similar amounts to know that their information will be safe.
Although these drives are smaller than most laptop hard drives, you have to realize that most people (especially business users) will not fill 32 gigs worth of space. Most people pay for extra storage they will never use. College kids downloading DVDs will need more than 32 gigs, not people using computers for business use or the common user.
2. New MP3 Players
While everybody knows that Apple has a very solid grip on the portable audio market, we cannot forget that there are other players. SanDisk is able to produce MP3 players with similar features (minus iTunes) at a much lower cost, since they are the actual producers of the memory used. This vertical integration gives them an advantage in the market.
Sansa Express (pictured): This 1 gig music player has a screen, a built-in USB connector, is similar to size to the iPod Shuffle, and is only going to be $59. People who have less than 1 gig of music probably aren't committed to using solely iTunes as their music library, so the Sansa Express should be able to grab some good share in this market.
Their other MP3 players are also similar in size (although a bit bigger) to apple's models, but offer additional features at a much lower cost.
3. Flash USB drives & Memory Cards
This christmas season, flash USB drives were flying off the shelves. At the price they're at, everybody wants one. Many stores used SanDisk's USB drives as leader items to get people into the store during the holidays. This form of advertisement means that the retailers spent this money out of their own pockets.
4. The stock's valutaion
SanDisk got hit hard in the past year.
The PEG ratio, my favorite metric for measuring a stocks value, trades below 1 at 0.91.
The trailing P/E ratio is 24.5, compared to the industry average of 64.7.
Quarterly revenue growth (yoy) is 27.4% compared to the industry's lowly 8.50%
Operating margin is 19.4% compared to an industry 10%.
This company's ratios are clearly better than others in its industry, but it trades at a lower P/E. This isn't right.
Earnings come out January 30th. Watch for a rise going into earnings.
-Sam
Updates
01/08/07 SNDK @ 44.71. New bullish call.
10/31/06 EXP @ 40. Now @ 43 (7.5% Gain) Staying very bullish on this one. Great valuation and housing is coming back into a positive light.
10/15/06 DHIL @ 63. Now @ 87.19 (38% Gain) I recommend reducing. The CEO sold a bunch. It's risen very quickly, so it'd be best to take money off the table.
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