Key Points
Sandisk shares have dropped around 46% since their June 25 record close.
Management forecast fiscal first-quarter revenue around 18% over the previous quarter's, at the midpoint.
Sandisk's data center revenue more than doubled sequentially to $2.98 billion in its fiscal fourth quarter.
Sandisk (NASDAQ:SNDK) stock hit its highest close ever on June 25, ending the day at $2,335. Four months later, the flash memory maker's shares trade near $1,262 as I write -- about 46% lower.
And the slide hasn't eased lately. The growth stock has lost about another 10% since Oct. 15, including a drop of over 8% on Oct. 22, when the PHLX Semiconductor Index fell nearly 7%.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
That leaves the stock near where it closed the day after Sandisk's last quarterly report, in early August. The next report comes Thursday, Oct. 29.
Is the slide a chance to buy before then? I think it rests on three things the quarter has to show: rising flash prices, tight supply, and growing data center sales.
Image source: Getty Images.
Prices are still rising, just more slowly
Sandisk's guidance for its fiscal first quarter of 2027, which ended in early October, puts revenue at $10.3 billion to $10.8 billion. The midpoint is around 18% above the $8.97 billion Sandisk took in during fiscal Q4. Sequential growth was 97% in fiscal Q3 and 51% in fiscal Q4, so the guidance suggests a second straight quarter of slowing growth.
Management expects both more storage shipped and what chief financial officer Luis Visoso called "modest price increases" to fuel this growth. On the August earnings call, he said that Sandisk had already raised prices significantly in the quarter before.
This timing matters when comparing Sandisk to Micron Technology (NASDAQ:MU), which also sells NAND flash. Micron said its NAND prices rose around 30% sequentially in its fiscal fourth quarter, which ended Sept. 3 and covered two of the three months in Sandisk's quarter.
Still, if flash prices kept climbing at anywhere near Micron's rate, Thursday's report might show pricing adding more than the guidance assumed.
But the fiscal second-quarter outlook may matter even more. An outlook that counts on volume alone might signal Sandisk's price hikes are petering out.
Sandisk says demand is outpacing supply
Supply matters just as much, since tight supply is what lets prices climb. Sandisk expects its sellable bits (the storage capacity it has available to sell) to grow by a mid-teens percentage in fiscal 2027. That's a little under its normal target, because Sandisk plans to carry more inventory to support its multiyear supply deals. Plus, Visoso said customer demand is rising faster than supply, so Sandisk expects its output to stay on allocation (rationed among customers) beyond calendar 2027. And Micron, too, expects the NAND industry to remain supply-constrained in both 2027 and 2028.
Much of this demand is from data centers. Showing how fast the business has changed, Sandisk's data center revenue more than tripled from $440 million in fiscal Q2 2026 to $1.47 billion in fiscal Q3, then more than doubled to $2.98 billion in fiscal Q4. By then it was one-third of total revenue. For fiscal 2026, data center revenue climbed 437%.
Sandisk doesn't guide by end market, so Thursday's report will be the first look at how that business held up in fiscal Q1. Micron's results are encouraging here, too. Its data center SSD revenue was almost $10 billion for its fiscal Q4, up over tenfold from the year-ago quarter.
Should you buy before Thursday?
The stock price seems to assume the boom ends soon. At roughly $1,262, Sandisk's price-to-earnings ratio is about 18, based on the $70.88 in non-GAAP (adjusted) earnings per share it made in fiscal 2026.
Using analysts' consensus estimate of adjusted earnings in fiscal 2027, which ends in mid-2027, the forward price-to-earnings ratio drops to about 6. Micron's is about 5 on its own fiscal 2027 consensus. At price-to-earnings ratios that low, investors seem to expect memory profits to shrink soon.
Six times earnings is arguably a cheap valuation for a business that expects its output to stay rationed past 2027. That said, one outlook has already moved the stock hard. Shares dropped almost 7% the day after the August report, when management guided for just modest price increases.
So, should you buy Sandisk before Thursday's report?
I'd wait for it, even though the stock looks more appealing than it did two weeks ago. But the fiscal Q2 outlook should show if Sandisk is still raising prices, and I'd rather see that before buying a stock this volatile.
Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.