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SanDisk Corp. (SNDK)

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SanDisk Corp. (SNDK) posted stellar third quarter results with both the bottom and top lines surpassing the Zacks Consensus Estimates. Though the results came below the year-ago levels, the sequential comps were better than expected. Revenues from OEMs and Retail have begun to recover.

Fourth quarter guidance was encouraging as well. Though lackluster PC sales, European issues, competition from Micron Technology Inc. and currency fluctuations could hurt the fundamentals a bit, we remain overtly positive on management's commentary of a turnaround story in the coming quarter and beyond, and strong secular demand for NAND flash.

We upgrade the stock to Outperform. We set a three-month target price of $52.00, representing a P/E multiple of approximately 28.7x our 2012 earnings per share estimate, which is on par with the industry average.

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