Here is a summation of the SSB call....
However, Near-Term Stock Catalysts Seen Bifurcated: While the SNDK/FLSH nearterm
catalyst profile has invited investor interest, albeit against a risky oversupply backdrop,
we foresee an divergent evolution over the next two-to-three months and note:
1) Recently-strong NAND spot pricing likely rolls over post the pre-holiday memory
card build, likely in nid-November revealing the structural oversupply in the market
(negative for vertically-integrated SNDK and raising risk to consensus 2005E EPS
of $1.65 vs our $1.55, but ultimately positive for fabless FLSH)
2) Japanese digital camera manufacturers, collectively tracking 12% below forecast
2004 unit shipment targets through August and accounting for 80% of WW output,
likely to begin cutting unit production targets in late-October (negative for SNDK)
3) Manufacturing transitions, a Toshiba/SanDisk positive this year, face diminished
marginal benefits in 1H05, leaving GMs vulnerable to aggressive pricing.
4) 4Q04 digital camera, USB drive, and handset seasonal sales enthusiasm likely gives
way to 1H05 product inventory overhang concerns (negative for SNDK and FLSH)
5) Handsets sales, a 2H04 positive, appear the singular stock catalyst through mid-
2005, (positive for SNDK and FLSH, though comprehended in revenue estimates)
Overall, they are sticking with their thesis that NAND flash is going to be in oversupply in '05, which would make this the time to exit Sandisk. One point I do worry about....after Sandisk makes the transition to 90nm, they really arent going to be able to add much internal capacity in '05.
What options look attractive here?
I ended up buying more shares and am looking at to add to some OTM long-dated calls that I own. I might put some gambling money into the October 30's but am trying to decide if I would be better off spending that money at the casino <g>.
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