Art,
Let me ask you something, do you perceive any risks to Sandisk at all in the near-term? If there are risks what are they? I have laid down my thoughts and reasoning behind them and I can very well be wrong with the concerns that I have but I have explained my thought process and have not made any blanket statements like the last one you have made in this post.
<Pam, you point out that short positions increased between May 15 and June 15. That increase corresponds with weakness in the stock price but does not predict current pricing of the shares.
Data on short positions, because it is only available considerably after the fact, is a lagging indicator. It shows what some investors were thinking earlier. It may influence what some investors think later, but so may other factors, such as recent data on increasing digital camera sales. Putting all this stuff together, it looks to me like anyone would have a pretty difficult case to prove a drop in SNDK earnings.>
I think, I already mentioned that short-sale data is not timely but its not that old either. It is accurate as of June 15 The delay is only few days at the most for now. As the month progresses, we are in the dark for a longer period. Whatever the shorts are thinking, so far they have been on the money and I wouldn't be surprised if they already started closing some of their posn's last week when we saw an overall rally in the market and some more will do it in the coming weeks and months. Some of it could even be hedged against the shares they will get from convertible bond issue, who knows?
<Additionally, SanDisk has not provided any guidance to correct its conservative, but optimistic earlier prediction on earnings for this quarter. That alone suggests that fears of oversupply and attendant pricing pressures are exaggerated.>
The quarter hasn't ended yet so any announcement is premature. In any case if you read my postings, I have always been saying- SNDK is most likely going to make the numbers even if things are slowing by stealing away the marketshare from players like Lexar and others. I would worry about negative announcements from companies like Lexar but not from Sandisk. And than what happens? They will bring down SNDK in sympathy and while some disgruntled shareholders are selling the stock (remember this stock has given us more pain than joy in the last 8-9 months ever since it started its downward journey from about 44), shorts are covering their posns! Are fears of oversupply exaggerated? Only time will tell. Let me make a bold prediction- If the price cuts from Sandisk doesn't raise the average size per card significantly from 189MB that we saw last Q either in this or next Q, there will be oversupply! We need to move those chips out of the factories else there will be a glut near-term until demand again exceeds the rate of supply growth! Consumers can delay their buying decisions to get better deals but factories are producing more chips 24x7!! Not that such a correction is not healthy, it is healthy. It will get rid of some of the inefficient and unwanted players out of the game.
<I think the shorts are basing their decisions on market gossip of the sort that comes from people who have little understanding of the technology and the markets served by that technology.>
Art, do you have any evidence to back this? There are enough smart people than you and I and they are really good at what they do! Technology goes only that far, right now you need to understand the economics aspects of the product. You are missing the demand/supply picture completely! Don't get me wrong, I remain optimistic about this company and still holding long (even though at a slight loss) but I do see the risks that I have talked about. But I also know that I have already taken most of the beating and if I can hold it for the next year or two, I will still make a good return on it from this price level. As for the next q or two, it can go a few bucks (5-7) in both directions depending on the demand/supply imbalance situation. Maybe a little less on the downside unless the rev growth declines significantly. Of course, if the demand situation improves, I will change my opinion on this subject.
-Pam
PS: My suggestion to you is re-read my posts where I am explaining my thinking about the market dynamics. I would like to have a healthy discussion with those of you who are interested but please don't make senseless comments like your last one. |
