$SNDK, HYPE STOCK?

Unbeatable Competition and HYPE.

Look at Micron $MU and SNDK seems to be an extreme hype. Micron is more to the DRAM market which faces extreme volatility. However, SanDisk is also in a volatile NAND market. Price margins may go lower especially when Toshiba finish up their new FAB. And Samsung is not going to keep quiet either.

IPAD is NOT JUST SANDISK.

SNDK managed to run up due to strength from IPAD sales. Look at how they are correlated. AAPL and SNDK moves up together. However, the correlation was broken on Friday.

Investors are buying SNDK as if IPAD sales means SNDK will do super well. If people buy IPAD or IPHONE, then another product will not be bought. Think about iPhone. If someone buys iPhone, means he is giving up the chance to buy Blackberry or other smartphones which also uses NAN flash supplied by SanDisk.

Lastly, IPAD does not always use Sandisk. People have dismantled their IPAD online. Look at all those dismantled IPAD, try to find us a SANDISK product… WHERE IS IT???? Theres toshiba…. I don’t see OEM which SANDISK usually do…

Here’s the link: http://www.macrumors.com/2010/04/02/fcc-ipad-images-reveal-broadcom-chip-apple-a4-toshiba-flash-memory/

OEM could mean MICRON too……

So this is just a hype, BARRON article contributed to the GAP on monday. BARRON said that theres a SANDISK In all ipad….. So investors thought the many millions of IPAD sold had SANDISK in it.

TREND

The stock has climbed from $15, and the trend has not reversed yet. It is not going to reversed to this time. I am only looking at a very short term short at this point. SNDK is weak now that there is no buying fury at $50.

WEAKNESS

It is reasonable to take advantage of this weakness and short this stock as we anticipate many profit takers here.

GAP FILLING

The gap at $45 would most probably be filled. Sandisk has a good history of filling gaps. Look at the markings on the charts.

SENTIMENT

STRONG SELL. SNDK is full of HYPE. SHORT TERM SHORT, reason for short term, those investors are crazy, they will buy this no matter what.

MARGINS will go down in the near future. This stock is unsustainable at $50.

Recent Analyst recommendations:

Goldman Sachs HOLD @ $40
Many others TP @ $40 area. So I think that’s a good target, however, I will close half of my short at $45 and let the others run.

Disclosure: I shorted this stock at $49.92.