Even After a Monster Rally, Analysts Nonetheless Suppose You Ought to Purchase Sandisk Inventory

In a current piece, I had highlighted how Morgan Stanley believes that the “distinctive” demand for reminiscence chips will normalize, and consequently Nvidia (NVDA) would be the one to return out on the profitable facet due to this. But, even in a so-called normalized state of affairs, the demand for reminiscence chips will proceed to develop. Agreed, the tempo of development could undergo its personal motions, topic to market cycles, however reminiscence stays a vital and plain element of the broader AI image, maintaining demand intact.

Monetary providers main BNP Paribas thinks the identical as properly. In a current word to shoppers, the dealer mentioned, “Our evaluation of CQ1 contract costs of fifty+ [dynamic random access memory] SKUs and 75+ NAND SKUs leads us to estimate total [dynamic random access memory average selling prices] can advance 90% Q/Q in CQ1, adopted by a 6% Q/Q enhance in CQ2 as rising AI server demand is driving a wider supply-demand imbalance that’s exerting upward pricing stress. For NAND, we estimate CQ1 costs may enhance 55% Q/Q, adopted by 5% Q/Q enhance in CQ2 predominantly pushed by supply-side dynamics as NAND suppliers proceed to shift capability to enterprise storage merchandise whereas remaining prudent on capability additions.”

Primarily based on this evaluation, BNP Paribas stays “Obese” on Sandisk (SNDK) with a worth goal of $650, which suggests an upside potential of 23% from present ranges.

Based in 1988, Sandisk was, till not too long ago, a distinct segment identify identified solely within the know-how house for its reminiscence prowess. Nonetheless, as reminiscence shares went parabolic, Sandisk captured the creativeness of a large swath of the investing world. Established to commercialize flash reminiscence storage know-how, Sandisk is now a semiconductor storage firm centered on NAND flash reminiscence and solid-state storage options.

Valued at a market cap of $77.8 billion, SNDK inventory is up a scarcely plausible 921% over the previous yr.

Now, the bone of rivalry is whether or not Sandisk can maintain this up or not. Honestly, though BNP Paribas has made a case for investing within the inventory, its opinion relies on short-term triggers. Has Sandisk received it in itself to be a bona fide wealth creator for years? Let’s discover out.

Sandisk has been in operation for lower than a yr in its present type after its spinoff from Western Digital (WDC). Nonetheless, its outcomes couldn’t have been higher on this interval, with the underside line surpassing estimates in every of the previous 4 quarters. Notably, the outcomes for the latest quarter had been blockbuster as properly, with each income and earnings comfortably outpacing the consensus estimates.

Revenues for Q2 2026 stood at $3 billion, up 31% on a sequential foundation. Revenues within the Edge section, its largest and which focuses on its core specialty of flash reminiscence and SSDs, went up by 21% in the identical interval to $1.7 billion. Nonetheless, the quickest development was skilled by the Datacenter section, which soared by 64% quarter-over-quarter to $440 million.

Earnings, in the meantime, multiplied by greater than 5 occasions quarterly to $6.20 per share. This was a lot above what the Road anticipated at $3.62 per share. Now, for Q3 2026, Sandisk expects EPS to be within the vary of $12 to $14 per share. This might be an enormous enchancment from the year-ago interval when the corporate reported a loss. Alternatively, revenues are forecasted to be between $4.40 and $4.80 billion, the midpoint of which might denote an annual development fee of 170.6% on a year-over-year (YoY) foundation.

Turning again to Q2 2026, internet money from working actions for the quarter got here in at $1 billion in comparison with simply $95 million within the earlier quarter, as Sandisk ended the quarter with a money stability of $1.5 billion. This was a lot above its short-term debt ranges of $20 million.

Moreover, the SNDK inventory continues to commerce at affordable ranges, too. Whereas its ahead P/E and P/CF of 13.24 and 15.13 are decrease than the sector medians of 21.20 and 17.65, respectively, its ahead P/S of 5.03 isn’t a lot greater than the sector median of three.03.

Sandisk’s spinoff from Western Digital couldn’t have gone properly, with essentially the most stark proof of that being the outsized rally in its share worth. Nonetheless, below the hood, it additionally marked a strategic pivot for the corporate to a pure-play NAND and SSD participant, catapulting it to turn into a notable element within the AI infrastructure sector.

Delving deeper into its give attention to NAND, Sandisk’s message readability to the market has boded properly for the corporate. Enterprise clients, primarily LLM builders, desire NAND reminiscence for its long-term storage capabilities and non-volatile nature, which means it retains your information even when the ability is turned off. Additionally, Sandisk’s centered enterprise mannequin, centered on reminiscence and storage slightly than full-scale chip fabrication, retains capital expenditure comparatively low and avoids the all-or-nothing dangers that pure-play producers typically face.

Moreover, the corporate’s development trajectory is supported by the continued enhance in NAND content material per machine, a development accelerated by the shift towards edge AI and decentralized inference. Chip designers are actively in search of methods to chop reliance on pricey, power-hungry DRAM, turning as an alternative to NAND for a lot of storage-intensive workloads. The rise of edge AI additional amplifies this tailwind, as extra processing strikes from centralized cloud servers to native units and techniques.

Notably, to maintain tempo with demand, Sandisk has deepened its long-standing collaboration with Kioxia (KXIAY). The not too long ago prolonged three way partnership features a dedication from Sandisk to pay Kioxia $1.17 billion for extra manufacturing providers, unfold throughout annual installments from 2026 to 2029. This association secures incremental greenfield capability with out requiring Sandisk to bear the complete burden of latest fab development.

Trying to 2026, Sandisk’s strongest aggressive benefit seems within the ultra-high-capacity section, significantly for AI information facilities. Whereas rivals corresponding to Micron (MU) and SK Hynix have focused on high-bandwidth reminiscence (HBM), Sandisk has established clear management in high-density enterprise SSDs (eSSDs). Its newly launched 256TB UltraQLC NVMe SSD, constructed on BiCS8 QLC NAND, practically doubles the capability of Micron’s 128TB choices. The BiCS8 know-how employs a CMOS Bonded to Array (CBA) structure that allows industry-leading 4.8 Gb/s I/O speeds as of early 2026, together with roughly 30% decrease energy consumption in contrast with Samsung’s typical monolithic designs. These efficiency traits place Sandisk favorably within the high-margin, performance-critical segments of the AI storage market.

Taking all of this under consideration, analysts have deemed SNDK inventory a consensus “Reasonable Purchase,” with a imply goal worth of $700.94. This means an upside potential of about 32% from present ranges. Out of 21 analysts overlaying the inventory, 14 have a “Robust Purchase” ranking, one has a “Reasonable Purchase” ranking, and 6 have a “Maintain” ranking.

On the date of publication, Pathikrit Bose didn’t have (both instantly or not directly) positions in any of the securities talked about on this article. All data and information on this article is solely for informational functions. This text was initially printed on Barchart.com