Last Wednesday, the Milpitas, Calif.-based SanDisk Corporation (Nasdaq: SNDK) reported first-quarter results that smashed analyst expectations, and the company's shares shot up 6% in after-hours trading.

But our Chief Investment Strategist Keith Fitz-Gerald saw that beat coming and put readers out in front of it.

He talked to me about its recent stellar performance...

American Resilience Is the Fuel

"One of the arguments that I've advanced in recent weeks is that American companies are far more resilient than Wall Street would have us believe - which is why I watched the sell-off with a feeling of opportunism, and not apprehension," Keith told me. "In the specific report you referenced, BP, I agreed with your assessment that we're moving into a 'stock-picker's market,' and listed three companies that I believed investors should be taking a look at. SanDisk's great first-quarter numbers affirm that assessment."

Keith also recommended ABB Ltd (NYSE: ABB) and Abbott Laboratories Inc. (NYSE: ABT). ABB and Abbott are both earlier Private Briefing recommendations. SanDisk was a brand-new recommendation, but one I like a lot; Keith and resident tech guru Michael Robinson also each like the stock.

One reason it's kind of a cool investment play is that you probably use its products. At minimum, I'm betting you have at least one of its USB Flash Drives. You might also have a SanDisk Micro SD card (the kind you use in a digital camera). And I also have several SanDisk MP3 players; I download "audiobooks" from Audible.com to keep me company during my hour-long commute (one-way) each day.

When you take all of this together, SanDisk "is a great place to start if you're just joining in or have a little extra cash you'd like to put to work at the moment," Keith says.

The company's first-quarter results bear that out.

Revenue totaled $1.51 billion, an increase of 13% on a year-over-year basis. It was $20 million more than analysts were expecting.

Profits came in at $1.44 a share - a 71% gain from the same period a year ago and a full 19 cents better than the Wall Street crowd was expecting.

"We delivered record first quarter results, driven by 61% growth in our SSD (solid-state-drive) revenue and strong retail performance," said Sanjay Mehrotra, SanDisk's president and CEO. "We are excited by the momentum we are building in our business as we continue to execute on our growth initiatives."

A Solid (State) Growth Strategy

SanDisk is hitting its own growth targets by tapping into some of the hottest growth trends - including data centers, the Mobile Wave, and Cloud Computing.

Indeed, the company has recently introduced innovative products in three categories:

A line of "CloudSpeed" enterprise SSDs for data-center and Cloud-Computing storage solutions.

A line of high-performance "iNAND Extreme" embedded flash drives for Android-based smartphones.

And a 128-gigabyte SanDisk Ultra microSDXC" UHS-1 card, which the company says is the world's highest-capacity mobile storage offering.

These are all sound strategic moves, says a recent report from stock-researcher Trefis.com.

"With user data increasingly moving to the Cloud, storage demand from data centers is increasing," the report states. "Over the next few quarters, the company expects the contribution of SSDs to go up to around a quarter of its net revenue due to the expected growth in enterprise storage demand and its new products. If the company meets its expected target, it would provide a substantial boost to earnings."

Late last year, SanDisk upgraded its "Flashsoft" software because it wanted to target the accelerating demand for software-defined storage - a growth market we told you a lot about in a recent report on EMC Corp. (NYSE: EMC).

And the way SanDisk pulled this off means its Flashsoft software makes it possible for a standard SSD to be used as high-speed caching memory for enterprise-level storage devices. With such flexibility, SanDisk aims to capture the attention of information-technology (IT) departments that are contemplating the switch to flash arrays. Although flash arrays are gaining traction in the industry, switching to arrays is still costly. Even so, Trefis analysts say this represents a new market for SanDisk, meaning lots of long-term growth should come from software-defined storage.

Wall Street currently has a one-year target price of $81.93 on SanDisk shares - which is about 8% above Keith's recommendation price of $75.69. Of course, we see much bigger gains ahead in the long term.

And after the great "earnings beat," look next for investment-banking analysts to start upgrading SanDisk and boosting their target prices for the stock. That will serve as a nice catalyst in the near term - and will jump-start the long-term appreciation we see for this stock.

We'll keep you posted...

Source : http://moneymorning.com/2014/04/22/the-earnings-beat-thats-perfect-for-this-market/

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