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To: H James Morris who wrote (92571)	1/30/2000 1:08:00 PM
From: Glenn D. Rudolph	Respond to of 164684

Price: $96 3/4 12 Month Price Objective: $116 Estimates (Dec) 1999A 2000E 2001E EPS: $0.85 $1.40 $1.80 P/E: 113.8x 69.1x 53.8x EPS Change (YoY): 64.7% 28.6% Consensus EPS: $1.19 NA (First Call: 14-Jan-2000) Q1 EPS (Mar): $0.15 $0.32 Cash Flow/Share: $0.63 $0.88 $1.20 Price/Cash Flow: 153.8x 109.9x 80.6x Dividend Rate: Nil Nil Nil Dividend Yield: Nil Nil Nil Opinion & Financial Data Investment Opinion: C-2-1-9 Mkt. Value / Shares Outstanding (mn): $3,487.1 / 34 Book Value/Share (Dec-1999): $17.06 Price/Book Ratio: 6.0x ROE 1999E Average: 10.4% LT Liability % of Capital: 0.0% Est. 5 Year EPS Growth: 30.0% Stock Data 52-Week Range: $110 3/4-$17 Symbol / Exchange: SNDK / OTC Options: Phila Institutional Ownership-Spectrum: 42.5% Brokers Covering (First Call): 5 ML Industry Weightings & Ratings Strategy; Weighting Rel. to Mkt.: Income: Underweight (07-Mar-1995) Growth: Overweight (13-May-1999) Income & Growth: Overweight (13-May-1999) Capital Appreciation: Overweight (10-Feb-1999) Market Analysis; Technical Rating: Above Average (25-Jun-1999) The views expressed are those of the macro department and do not necessarily coincide with those of the Fundamental analyst. For full investment opinion definitions, see footnotes. Investment Highlights: ú SanDisk reported 4Q99 EPS of $0.30, beating both our and the Consensus estimate by a $0.08. Revenues of $82.8 million were up 22.6% QoQ, above our $75.0 million estimate driven by robust sales of CompactFlash into the digital camera market. ú With demand for SanDisk?s flash memory products continuing to far outstrip the available supply, we are raising our price target to $116, or 64.4 times our new $1.80 F01 estimate. We are reiterating our Accumulate/Buy ratings. Fundamental Highlights: ú Solid growth in sales was driven by skyrocketing demand for CompactFlash cards used in digital camera, MP3 audio, and other applications. ú Order visibility is at record levels, with 1Q00 appearing to be fully booked, along with most of 2Q00 as well. The company remains capacity constrained. ú Firming ASPs, a richening product mix, and increased manufacturing efficiencies should combine to drive gross margins higher moving forward. Comment United States Semiconductors 27 January 2000 Eric Rothdeutsch Vice President Christopher Danely Industry Analyst SanDisk Corp Inc Blowout Quarter Led By CompactFlash Sales; Raising Estimates and Price Objective ACCUMULATE Long Term BUY Reason for Report: Earnings Report Merrill Lynch & Co. Global Securities Research & Economics Group Global Fundamental Equity Research Department RC#20102712 Stock Performance 0 10 20 30 40 50 60 70 80 90 100 110 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 1997 1998 1999 2000 SanDisk Corp Inc Rel to S&P Composite Index (500) (Right Scale)