Sandisk Stock Is Down 45% Over the Past Four Months. Is It a Bargain or a Value Trap?
Yahoo Finance ·
Sandisk ( SNDK -19.20% ) has been one of the most important stories of the artificial intelligence (AI) revolution. The memory maker has seen skyrocketing demand for its NAND flash memory products, which are critical for AI development, and high growth has led to outstanding stock gains; Sandisk stock is up 444% over the past year as of Nov. 4. However, that's down from much higher gains earlier this year. In fact, despite phenomenal results, Sandisk stock is down 47% since the beginning of July. Is this an opportunity to buy on the dip? Or should investors steer clear? Sandisk makes memory products, from the memory cards you keep in your phone to the chip components that allow AI models to run training and inference. It has three segments: consumer, edge computing (including devices like computers and smartphones), and data centers. The data center segment has driven the company's incredible growth over the past few quarters, resulting in tremendous profitability . In its fiscal 2027 first quarter, Sandisk beat Wall Street's expectations. Sales rose 378% year over year to $11.0 billion, and earnings per share (EPS) hit $52.60 (before the stock split), up from $0.75 a year ago. Sandisk also announced an eight-for-one stock split, with split-adjusted trading beginning Nov. 20. The split lowers the share price without changing the company's value. Note the astronomical change in EPS, and know that Sandisk won't be able to keep up that kind of growth going forward. Memory typically moves in a cycle, and it looks like it's at a peak right now. It might be able to sustain peak levels for some time, but the market is worried it won't sustain that kind of growth. Management is keenly aware of this and has introduced a new arrangement with clients that it calls the new business model (NBM) deals. It already has eight of these NBMs, with multi-year agreements to lock in revenue.
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