SanDisk Corporation (SNDK), Apple Inc. (AAPL): Add a Few More “Bytes” to Your Portfolio

Flash storage device maker SanDisk Corporation (NASDAQ:SNDK) released its second quarter results recently, and to the surprise of many, the results were staggering as the company substantially beat the consensus estimates. Taking a look at the statistics may knock your socks off, but the innovations and implementations that enabled it to post such a massive profit will leave you amazed.

Let us take a look at the factors that lifted SanDisk Corporation (NASDAQ:SNDK)’s margins to a new high.

Surpassing the expectations

There was a remarkable jump of 43% in SanDisk Corporation (NASDAQ:SNDK)’s revenue as the company generated $1.48 billion, which comfortably beat the analysts’ estimate of $1.39 billion. The rich products portfolio enabled SanDisk to surpass all expectations. Commercial consumers contributed towards 65% of the company’s revenue, while the remaining 35% was generated from retail.

This extraordinary augmentation of the revenue was primarily driven by the ever expanding demand of the company’s products. Apart from that, the strengthened price of the company’s microSD cards also favorably impacted the results.

SanDisk Corporation (NASDAQ:SNDK)If you’re still not awed by the statistics, a look at the company’s net income will certainly leave you impressed. SanDisk Corporation (NASDAQ:SNDK)’s net profit increased exponentially from $13 million to $352 million as the earnings per share amplified from $0.05 to $1.21 per share, comprehensively hammering the analysts’ estimate of $0.90 per share.

Barring a few flagship models of various companies and iOS devices, most of the smart devices and feature phones have provision for expanding storage beyond the embedded capacity, which also is responsible for continued increase in the sales of SanDisk Corporation (NASDAQ:SNDK)’s microSD cards. This significantly contributed towards this massive growth.

The escalating demand of highly efficient solid –state drives, or SSDs, resonated with the company’s plans, and out of all its competitors, SanDisk Corporation (NASDAQ:SNDK) benefited the most from this trend.

A peep into future prospects

If you’re thinking that the company may have maxed out its profits, then you’re in for surprise. Riding on its current wave of success, SanDisk Corporation (NASDAQ:SNDK) is trying to consolidate its position in the market. Let us take a look at the scenarios that may add to the current success.

Smartphone boom

It is estimated that over a billion smartphones and tablets will be shipped in the present fiscal year and the greater part of these devices will give the end consumer an option to expand storage beyond the embedded capacity, which will increase the demand of SanDisk Corporation (NASDAQ:SNDK)’s microSD card. This will undoubtedly help the company to match, if not exceed, the previous quarter margins as it will try to maintain a healthy demand-supply ratio.

Landing a spot in iPhone 5

The use of SanDisk Corporation (NASDAQ:SNDK)’s flash memory in Apple Inc. (NASDAQ:AAPL)’s iPhone 5 contributed to an upsurge in the company’s margins. The ever growing appeal of Apple’s products, especially in the U.S.A., led to the increase in demand of the company’s flash memory.

But that’s not it, there’s more in store. Apple Inc. (NASDAQ:AAPL) is planning to release a more economical version of the iPhone, which will benefit its sales as the company is trying to tackle the tight economic conditions and the increase in sales will be complemented by an increased necessity of SanDisk Corporation (NASDAQ:SNDK)’s flash drives. SanDisk’s plan of developing on the back of expected success of a cheaper iPhones is looking likely to be a success.

Investing in SanDisk Corporation (NASDAQ:SNDK) should boost your portfolio but, if you’re still not convinced, let me give you another good reason to buy this stock.

Innovations in SSDs

With the initial success of the newly released SSD called “SanDisk Corporation (NASDAQ:SNDK) Extreme II SSD,” the company is innovating its way to success by planning to introduce new SSDs, which will complement the needs of its customers. Over the previous conference call, Sanjay Mehrotra, Chief Executive Officer and president of the company mentioned that the recent acquisition of SMART Storage Systems will benefit it, as the former was an innovative SATA and SAD SDDs supplier.

Apart from that, SanDisk Corporation (NASDAQ:SNDK) has also developed an SSD using its 19-nano-meter technology and its shipments to the clients are on track.

Since the SSDs and other embedded products generate higher revenue and the demand for these products is always increasing, I expect the company to perform even better in the future.

Test of its resilience

In my opinion, there is no company capable of lucratively challenging SanDisk Corporation (NASDAQ:SNDK) on all fronts. But one competitor that may slightly dent its hope of building on its current triumph is Sony Corporation (ADR) (NYSE:SNE).

The collective sales increased 5% compared to the prior year to $68 billion, but let’s focus only on the mobile products of Sony Corporation (ADR) (NYSE:SNE) as it’s the only segment, which can potentially reduce SanDisk’s margins.

The company incurred a loss in almost all of the other segments, but Sony Mobile, a wholly-owned subsidiary of Sony Corporation (ADR) (NYSE:SNE), consolidated its position in the smart devices market, which contributed significantly to the corporation’s sales figures.

Many of Sony Corporation (ADR) (NYSE:SNE)’s premium mobile phones, which were unveiled in the last two years, denied user the option of expanding the storage, which may have slightly damaged the sales of SanDisk Corporation (NASDAQ:SNDK)’s microSD cards and Sony looks determined to stick to this trend like many flagship models of other companies.

Sony Corporation (ADR) (NYSE:SNE) is planning to increase its production of smart devices, which will have a positive impact on its sales as the company looks to offset the loss incurred in other segments and solidify its grip on the market.

Considerate summary

Even in these stringent economic conditions, SanDisk Corporation (NASDAQ:SNDK) was able to raise its margins, and I expect it to further enhance its performance. Even though the competitors are trying hard to catch up with SanDisk, in my opinion, they won’t be able to bully the company. The results of the previous quarter are an indication that the company is making the right moves to achieve its goal of long term success.

Ayush Singh has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple.

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