smartphone_4-300x217Earnings season is here and there are growing questions about the big names in tech — Apple (AAPL), Google (GOOG), Dell (DELL) and Hewlett-Packard (HPQ), to name a few. The driver of earnings will be the marketplace shift from personal computers to smart phones and tablets — personal tech.

  • Research firm IDC estimates PC shipments of 79.2 million in Q1 of 2013, an almost 11% decline from Q4 2013.
  • IDC attributed the falloff to tablets. Tablet sales grew more than 78% in 2012 to more than 125 million units. Their forecast for 2013 is growth of almost 50%.
  • IDC also predicts the smartphone market will grow more than 27% in 2013.

With this shift, I see two big winners, Apple and SanDisk (SNDK).

Apple’s growing share

Apple has been the dog everyone likes to beat recently. Wrong dog, that one. The company has stabilized its market share in phones and that share is now growing.

  • StatCounter, a market-tracking firm, reported serious growth in smartphone share for Apple in February. Apple’s share hit 27.2%, up from 23.3% in December. Android share stalled at the same time.
  • The Yankee Group’s March U.S. Consumer Survey  found that “only about 15% of consumers intend to buy a Samsung phone within the next six months, while 40% intend to buy Apple iPhones within that period.” The survey also found 61% of existing Samsung owners would stick with the brand versus 85% of iPhone users.

Apple is the best and the most undervalued company on the planet – my numbers show it is selling at a two-thirds discount to the S&P 500. Sometime in the next one to three quarters – perhaps as early as next week – this market foolishness will begin to end.

Surging demand boosts SanDisk

If you do not want a pick winner beyond the shift to personal devices, look at SanDisk, the leader in the NAND flash memory used in these devices. The company owns patents – and receives licensing fees – on various aspects of NAND flash memory production and the company sells a great deal of NAND chips itself.

  • The research firm IC Insights projects $31 billion in NAND sales in 2013, based on shipments of 8.8 billion units, with prices declining 7%. If that seems troubling, it is actually great news – NAND price decreases can top 20% a year and capacity is tightening.
  • Research company iSuppli sees NAND demand will increase past 2013 due to smartphones, tablets and the growing emergence of computers with solid state drives – memory equivalent to hard drives, now available from all major computer makers.

An increase in demand and a tightening of supply is the dream scenario for SanDisk. SanDisk is scheduled to report first-quarter earnings April 17 and I expect them to be above expectations. The stock itself has broken out. It is above its pre-crash high in anticipation of these earnings. I expect the stock to continue to run based on short-term and long-term fundamentals.


 Disclosure: Michael Shulman owns Apple shares and has sold Apple calls.




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