Sandisk upgraded to 'outperform' at RW Baird

Robert W. Baird upgraded shares of Sandisk Corp (SNDK), to 'outperform' from 'neutral', citing expectations of stable gross margin for 2011 and significantly better-than-seasonal NAND pricing for first half of 2011.

California-based Sandisk is the world's largest memory card supplier. The company makes data storage products based on NAND flash memory, which retains data even when power is interrupted. SanDisk manufactures the majority of the NAND it uses in its products through a manufacturing and technology development joint venture with Toshiba.

Robert W. Baird analyst Tristan Gerra sees stable gross margin for Sandisk in 2011 as NAND supply/demand outlook is likely balanced for that period, with possible shortages in the second half, driven by strong tablet unit growth.

We believe NAND pricing is now past a bottom, following a significant decline in 3Q, paving the way for a significant increase in NAND flash content in smartphones and tablets next year, Gerra wrote in a note to clients.

Gerra, who also raised the price target of Sandisk stock to $56 from $42, said SNDK shares appear well positioned to rebound from current levels, given the anlayst's outlook for a significantly better-than-seasonal first half of 2011, and potential shortages for second half of 2011.

Tablets will fuel solid state drive's continued mainstream ramp into portable computing platforms in 2011, acting as a significant driver for NAND flash demand, in our view, Gerra added.

Shares of Sandisk closed Monday's regular trading session at $42.57 on Nasdaq.