Another downgrade and it might be time to play some October options :-)....
siliconvalley.com
Inventory, pricing concerns send Lexar, SanDisk shares down
NEW YORK (Dow Jones/AP) -- Shares of flash memory makers Lexar Media Inc. and SanDisk Corp. fell for the second session Monday on inventory concerns and worry that aggressive pricing will hurt profit margins.
The declines come ahead of both companies' third-quarter earnings reports, which are expected on Thursday.
Shares of Fremont, Calif.-based Lexar finished at $8.36, down $1.01, or 11 percent, on heavy volume on the Nasdaq Stock Market. On Friday, the shares closed 6 percent weaker at $9.37.
Stock of Sunnyvale, Calif.-based SanDisk finished at $28.96, down $1.24, or 4.1 percent, on the Nasdaq. There was a 2.4 percent decline Friday that left the shares at a closing level of $30.20.
Investors skimmed some profits from SanDisk following a rally in the shares, and Lexar's recent short-covering ended following a strong run in the stock, analysts said.
Observers also pin the declines on Samsung Corp.'s recent NAND flash memory price increases. Lexar's profit margins are likely to be pinched as Korea's Samsung, which supplies its raw NAND flash memory, raises its prices.
Flash memory cards are used in digital cameras, personal digital assistants and other electronic products.
Likely to further hurt margins, analysts say, are SanDisk's plans to cut prices on its flash memory cards. SanDisk makes its own NAND flash memory, so its costs aren't as high as Lexar's, and the company can cut prices more aggressively. That forces Lexar to match those price cuts in order to compete, and digs further into Lexar's margins.
In addition, Bear Stearns analyst Gurinder Kalra reiterated an ``underperform'' rating on SanDisk shares, saying he expects ``significant oversupply'' in the first half of 2005. The excess inventory will force prices lower starting in late October or early November when distributors and retail channels are stocked up for the holiday season, Kalra said.
The analyst expects SanDisk to meet or beat third-quarter expectations, but foresees a lackluster fourth-quarter outlook, citing expectations of aggressive pricing during the quarter. |
