The Zacks Analyst Blog Highlights: SanDisk, Apple, Western Digital, Seagate Technology and Tetra Tech
CHICAGO, July 5, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include SanDisk Corp. (Nasdaq:SNDK-Free Report), Apple Inc. (Nasdaq:AAPL-Free Report), Western Digital Corp. (Nasdaq:WDC-Free Report), Seagate Technology plc (Nasdaq:STX-Free Report) and Tetra Tech Inc. (Nasdaq:TTEK-Free Report).
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Here are highlights from Wednesday's Analyst Blog:
SanDisk Gets SMART, Boosts SSD Portfolio
Flash memory storage vendor SanDisk Corp. (Nasdaq:SNDK-Free Report) recently acquired SMART Storage Systems, a bellwether solid state drive (SSD) storage solutions provider. The purchase consideration includes $307.0 million cash and certain equity-based incentives for SMART Storage Systems' employees. The acquisition will allow SanDisk to strengthen its position in the enterprise market for SSD storage.
SMART Storage specializes in providing SATA and SAS-based SSDs, which are supplied to tier 1 storage and server OEMs (original equipment manufacturer). Leveraging Smart Storage's capabilities and intellectual properties, SanDisk will be able to enhance its existing enterprise SSD and software portfolio, gain economies of scale and increase share in the potential $1.6 billion enterprise SATA and SAS space. SanDisk will be retaining the company's 250 employees.
The deal has already been approved by the boards of directors of both companies and is expected to close by August, pending certain customary and regulatory approvals. SanDisk expects the deal to be slightly dilutive to earnings in second half of 2013, before becoming accretive in 2014.
Earlier, SanDisk acquired flash memory software solutions provider, FlashSoft Corp. in Feb 2012 and enterprise SSD solutions provider Pliant Technology in May 2011.
At its recent analyst day (May 2013), SanDisk announced that it expects contribution from the SSD business to grow to roughly 35.0% by 2016. The company expects that 2 out of 3 notebooks will be enabled by flash in 2016, up from 1 out of 8 notebooks in 2012.
We believe that the synergies from the acquisition will help SanDisk to emerge as a major player in the fast growing flash memory market, thus lending greater stability to its revenue stream.
Restricted wafer capacity addition will boost better supply/demand metrics as well as pricing in 2013. Apart from this, we are positive on SanDisk's focus on mobile-embedded products (as several new smartphones and tablets, Ultrabooks and other end-client PCs running on SSDs are slated for launch) and a long-term supply agreement with Apple Inc. (Nasdaq:AAPL-Free Report).
But lackluster PC sales, European issues, stiff competition from Western Digital Corp. (Nasdaq:WDC-Free Report) and Seagate Technology plc (Nasdaq:STX-Free Report) (in SSD space) and currency fluctuations are concerns.
Currently, SanDisk holds a Zacks Rank #3 (Hold).
Tetra Tech Downgraded to Strong Sell
Zacks Investment Research downgraded Tetra Tech Inc. (Nasdaq:TTEK-Free Report) to a Zacks Rank #5 (Strong Sell). Tetra Tech is a technical service provider for water and environmental purifications, pollution control and other related fields.
Why the Downgrade?
On Jun 18, Tetra Tech lowered its financial guidance for the third quarter of fiscal 2013, which resulted in a downward revision in earnings estimate in the last 7 days. The Zacks Consensus Estimate for 2013 has gone down by a whopping 44.85% over the last 30 days to 91 from the earlier estimate of $1.65, while for 2014, the estimate decreased by 8.37% to $1.86.
According to the company, the lowered guidance to a loss of 30 cents to 50 cents per share from an earlier guidance of 32 cents to 42 cents earnings per share brought about the impacts of increased restructuring costs from weakness in Eastern Canada and mining. However, this necessitated investigation into possible breaches of fiduciary duty by the company. Different law offices have got engaged in this investigation. With this a number of lawsuits have been filed in the United States District Court against the company and Shareholders Alert has been declared. This had a further adverse effect on the stock.
The company delivered negative earnings surprises in three out of the last four quarters with an average negative surprise of 1.59% for the last four quarters. Also, the company's earnings estimate for the current quarter is a loss of 41 cents per share. Shares of Tetra Tech also attained a 52-week low on Jun 19 of $22.56. Moreover, most of the analysts have downgraded their estimates during the last 30 days and thus the stock experienced a sharp dip in its Zacks Rank straight from a Zacks Rank #3(Hold) to a Zacks Rank #5(Strong Sell).
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