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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: pompsander who wrote (27158)	12/21/2004 12:45:44 PM
From: Robert Douglas	Read Replies (1) \| Respond to of 60323

Here are some excerpts from the Merrill Report We are initiating coverage on SanDisk with a Buy rating and a 12-month price objective of $30. Our price objective, at 21x our 2005 EPS estimate, is supported by the mid-cycle valuation suggested by our long-term DCF model. At 16x our 2005E earnings, the stock is currently trading at a discount to its comp group, and considering that the company has over $7 per share in cash, we think the stock looks inexpensive. We are establishing fully diluted EPS estimates of $1.30 for 2004 and $1.40 for 2005; both are higher than consensus estimates. Our revenue estimates are $1.72 billion and $2.05 billion for 2004 and 2005, respectively, which translate to 60% growth in 2004 and 19% growth in 2005. We believe the Street is overly pessimistic regarding NAND flash memory supply-demand balance in 2005. Our proprietary bottom-up NAND flash supply model suggests that supply growth will remain constrained as new suppliers struggle to ramp up volume. Combined with limited capacity additions from the incumbents, we believe the market will see a healthy balance between supply and demand, rather than oversupply. We also expect the rate of price decline to return to the more normal level of approximately 40% year-over-year as the year progresses. The risk to our recommendation and price objective is an industry oversupply of flash components. We could see industry oversupply in 2005 if production issues are resolved or if new capacity is brought up sooner than we expect.