Sandisk (SNDK) shares have retreated from their recent peak, trading more than 34% below their 52-week high. The decline reflects profit-taking after a strong rally. In addition, investor concerns about intensifying competition from Chinese memory manufacturers have further weighed on the stock.
Despite the pullback, analysts have maintained a bullish outlook for Sandisk stock as the company continues to benefit from growing demand for memory solutions. SNDK's NAND flash-based storage solutions have enabled it to capitalize on AI-driven data center demand, and the momentum is likely to sustain. Also, higher average selling prices amid tight supply have strengthened Sandisk's revenue and earnings performance.
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Further, Sandisk's new business models (NBMs) support its bull case, adding stability and visibility to its revenue and earnings.
Sandisk Set for Solid Growth
Sandisk is well-positioned to deliver strong growth ahead, driven by accelerating AI-related storage demand, constrained industry supply, and a growing proportion of revenue tied to long-term agreements.
The company exited fiscal 2026 with solid operating momentum. Its revenue soared 175% year over year to $20.3 billion, reflecting a shift towards high-value customers. Moreover, adjusted EPS jumped from $2.99 to $70.88. Looking ahead, the setup for fiscal 2027 remains constructive. Demand is running ahead of available supply, and management expects NAND bits to remain allocated beyond calendar 2027. Moreover, pricing is likely to remain supportive.
While Sandisk is positioned to sustain strong growth, the market is pricing the stock considerably more conservatively. All these factors indicate SNDK could mark a solid recovery.
Supporting its growth is the ongoing strength in the NAND market. Notably, the NAND market is expected to keep growing at an accelerated pace, supported by AI inference as a tailwind. Moreover, pricing is likely to be another key catalyst.
For the first quarter of fiscal 2027, Sandisk expects revenue of approximately $10.3 billion to $10.8 billion, with sequential growth driven by both bit growth and pricing. Adjusted EPS is expected to reach $44 to $46, implying another substantial increase from the prior year, when it posted adjusted earnings of $1.22 per share.
Supporting the outlook is Sandisk's expanding NBM portfolio. These agreements provide greater revenue predictability and support more consistent earnings performance.
Management expects NBMs to account for more than 50% of Sandisk's bits in fiscal 2027 and approximately two-thirds of bits in fiscal 2028. That is a meaningful change in the company's revenue mix and will provide greater visibility into future demand. It estimates that its signed NBMs represent at least $93.9 billion of potential revenue based on floor pricing. Management believes the eventual revenue opportunity could be higher.
Sandisk's longer-term growth prospects also remain solid. The company expects revenue to expand at a mid-to-high-teens rate from fiscal 2028 through fiscal 2030. At the same time, management anticipates maintaining adjusted gross margins near 80% and generating an adjusted free cash flow margin of approximately 50%. The outlook reflects strong top-line growth with substantial profitability and cash generation.
Valuation Creates an Attractive Risk-Reward Setup
Sandisk stock has seen a significant correction, making its risk-reward equation more compelling. Trading at 7.5 times forward earnings, Sandisk stock looks attractive given its solid earnings growth outlook. Wall Street analysts expect the company's EPS to rise by approximately 201% in fiscal 2027, even against a challenging year-over-year comparison. Expectations also point to continued double-digit EPS growth in fiscal 2028.
Set for a Solid Recovery
Accelerating AI-related storage demand, constrained NAND supply, favorable pricing, expanding NBM coverage, and substantial expected earnings growth create a compelling setup for Sandisk stock. Following the stock's recent steep decline, its current valuation appears attractive and could support a meaningful recovery in SNDK shares.
Wall Street is bullish on SNDK stock. It currently carries a "Strong Buy" consensus rating. Meanwhile, the average analyst price target of $2,144.26 implies about 38% upside.
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
