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Sandisk Appears a Highly Lucrative Investment After Recent AI Meltdown

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Key Takeaways

  • Sandisk's Q1 fiscal 2027 revenues surged 378% year over year, fueled by AI-driven storage demand.
  • Datacenter revenues jumped 61% sequentially to $4.8 billion, while edge revenues rose 7% to $5.83 billion.
  • Sandisk expects Q2 revenues of $12.2-$12.6 billion and anticipates 40% datacenter bit-demand growth in 2027.

Sandisk Corp. (SNDK - Free Report) — a leading flash and advanced memory technology innovator — has benefited from the structural shift toward AI computing, which requires significantly more NAND flash storage per deployment compared with traditional workloads. 

AI training models and inference applications generate massive data volumes that demand high-performance enterprise solid-state drives. At the same time, edge devices need greater storage capacity to support on-device AI features. 

This creates a favorable demand environment where SNDK can command premium pricing for its advanced technology products while maintaining disciplined supply allocation. First-quarter fiscal 2027 results were superb with revenues surging 378% year over year and 23% sequentially. Datacenter revenues climbed 61% sequentially to $4.8 billion, supported by growing demand from hyperscalers and AI infrastructure customers.

Management maintained a confident outlook on AI-driven storage demand while emphasizing selectivity in customer agreements, manufacturing investments and product allocation. SNDK currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performance of SNDK year to date.

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Strong Datacenter and Edge Growth

Sandisk reported significant growth in its TLC enterprise solid-state drives (SSD) business and continued ramping of its QLC products, which address capacity-intensive applications such as AI data lakes, vector databases and retrieval repositories. 

SNDK’s edge revenues rose 7% sequentially to $5.83 billion, supported by resilience in premium and mainstream markets and stronger automotive and IoT demand. SNDK’s non-GAAP gross margin increased to 85.1% from 84.6% in the preceding quarter, while non-GAAP operating margin improved to 80.4% from 79.2%.

Robust Technology Roadmap

SNDK’s product pipeline including BiCS8, BiCS9 and BiCS10, supports higher storage density, interface performance and bandwidth. BiCS9 is expected to improve interface performance through next-generation CMOS, while BiCS10 introduces a 1-terabit TLC die for performance-intensive workloads and a 2-terabit QLC die with twice the read and write bandwidth of BiCS8. 

Sandisk’s high-bandwidth flash (HBF) technology also advanced during the quarter, with the first HBF memory die completing tape-out and fabrication underway. SNDK expects to deliver samples of its first HBF-based products in 2027, although this opportunity is not yet included in its long-term financial model.

Strong Outlook

For the second quarter of fiscal 2027, Sandisk expects revenues between $12.2 billion and $12.6 billion, with non-GAAP gross margin ranging from 84.5% to 85.5%. SNDK projects non-GAAP earnings between $55 and $57 per share before the announced eight-for-one stock split. 

The corresponding split-adjusted guidance is $6.88 to $7.13 per share. SNDK also anticipates approximately 40% year-over-year datacenter bit-demand growth in calendar 2027, driven by AI infrastructure investment.

Sandisk has important business agreements with Meta Platforms Inc. META, Dell Technologies Inc. DELL and TD SYNNEX Corp. SNX. Management highlighted strengthening datacenter demand and growing visibility through new business model agreements.

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Attractive Valuations

The stock has a forward P/E of 3.67X compared with the industry’s P/E of 10.83X and the S&P 500’s P/E of 18.58X. A P/E below 5.0 indicates the stock is significantly undervalued. Sandisk also has a PEG ratio of 0.04 compared with the industry average of 0.90 and the S&P 500’s PEG of 1.85. A PEG under 1.0 means a company has strong growth and value.

Solid Estimate Revisions

SNDK has an expected revenue and earnings growth rate of more than 100% each, for the current year (ending June 2027). The Zacks Consensus Estimate for the current year’s earnings has improved 1.3% in the last seven days. 

It has an expected revenue and earnings growth rate of 25.1% and 25%, respectively, for next year. The Zacks Consensus Estimate for next year’s earnings has improved 1.6% in the last seven days. 

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Impressive Short-Term Price Upside

The stock price of SNDK is up nearly 280% year to date. However, the stock is currently trading at a sharp 62.4% discount to its 52-week high price. The short-term average price target of brokerage firms for the stock represents an increase of 132.3% from the last closing price of $886.51. The brokerage target price is currently in the range of $1,300-$3,000. This indicates a maximum upside of 238.4% and no downside. 

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