SanDisk shares dropped roughly 7% in after-hours trading Wednesday after the company issued a fiscal first-quarter revenue forecast that fell short of Wall Street expectations. The decline came even though the memory-chip maker reported quarterly revenue and profit that beat analyst estimates.
Why the forecast disappointed
SanDisk projected first-quarter revenue between $1.35 billion and $1.45 billion. Analysts had been looking for around $1.5 billion. The company cited seasonal weakness and a slower-than-expected recovery in the NAND flash memory market. That outlook spooked investors, who had been hoping for a more aggressive rebound after a prolonged industry downturn.
The quarterly results themselves were solid. Revenue came in at $1.62 billion, above the $1.58 billion consensus. Adjusted earnings per share hit $0.85, topping the $0.78 estimate. But the forward-looking guidance carried more weight. In the chip business, the next quarter's forecast often matters more than the past one's beat.
Investor reaction
The after-hours selloff erased the gains SanDisk had made in the regular session. The stock had been up about 2% before the report landed. The 7% drop suggests traders were caught off guard by the cautious tone. Some analysts had been expecting a more upbeat view from management given recent price increases in NAND flash.
SanDisk's earnings report came out after the market close. The company didn't hold a conference call or provide additional commentary beyond the press release. That left investors to digest the numbers on their own.
The company's next quarterly report will be closely watched for signs that the demand environment is improving. SanDisk's forecast implies that the first quarter could be a trough before a seasonal pickup later in the year. But with the stock now trading lower, the pressure is on management to deliver when they report actual results in late April.
For now, the market is pricing in a slower recovery. Whether that's too cautious or just realistic is the open question.
