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Deutsche Says Hold, Ups Target To $55

Deutsche Bank analyst Bob Gujavarty this morning cut his rating on shares of SanDisk (SNDK) to Hold from Buy, despite what may be another “solid” year for the NAND flash memory chip market.

SanDisk is highly correlated to prices in NAND flash, and although demand continues to grow, Gujavarty is concerned new manufacturing supply coming on in the second half of this year may bring down prices “sharply,” assuming demand proves less elastic than people think.

However, Guavarty is not changing estimates at this time: he’s modeling $4.9 billion in revenue and $3.85 per share in earnings this year. He also raised his price target to $55 form $50, to reflect a multiple of enterprise value times sales this year of 2 times, which he thinks is appropriate because even if gross profit margin narrows, it probably won’t reach a trough level, so there’s not as much downside.

The SNDK piece was part of an overall downgrade of the chip industry by Gujavarty and his colleague, Ross Seymore — about that, more in a moment.
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