Key Points
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Sandisk’s latest earnings report clearly suggests that its red-hot growth is sustainable.
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Analysts are now anticipating stronger growth in Sandisk’s earnings.
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The stock’s cheap valuation suggests the possibility of a huge price surge over the coming year.
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Artificial intelligence (AI) stocks are witnessing a bloodbath on the market due to various reasons, including hotter-than-expected inflation, higher interest rates, concerns about access to financing amid higher capital costs, and the aggressive spending on AI infrastructure by hyperscalers that’s hurting their cash flow.
Shares of Sandisk (NASDAQ:SNDK) have been caught in the broader tech rout, and a strong earnings report from the company didn’t help it arrest the slide. Let’s take a closer look at Sandisk’s results and check if its fortunes will turn around in the coming year.
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Sandisk’s latest results indicate that its red-hot growth is here to stay
Sandisk released fiscal 2027 first-quarter results (for the three months ended Oct. 2) on Oct. 29. The stock plunged over 13% the next day amid a broader sell-off in tech stocks. However, Sandisk’s drop isn’t justified when we take a closer look at its earnings and guidance.
Sandisk’s revenue jumped by a whopping 378% year over year to $11.03 billion. Meanwhile, non-GAAP earnings per share (EPS) increased from just $1.22 in the year-ago period to $49.51 in the previous quarter. The numbers comfortably exceeded Wall Street’s expectations. Even better, Sandisk’s guidance for the current quarter is better than what analysts were looking for.
The company expects $12.4 billion in revenue in the current quarter at the midpoint of its guidance range. It anticipates earnings per share of $56.00. Analysts were looking for $54.69 in earnings per share on revenue of $12.29 billion. Moreover, Sandisk’s outlook clearly suggests that its red-hot growth is sustainable.
The company reported $3 billion in revenue and $6.20 in non-GAAP earnings per share in the second quarter of fiscal 2026. So, its top and bottom lines are poised for an exponential jump once again. It is worth noting that Sandisk’s revenue increased at a much slower pace of 61% in the same quarter last year, while earnings increased by 5x year over year.
So, Sandisk’s growth continues to accelerate, which explains why analysts anticipate its bottom line to jump by 220% in fiscal 2027 to $226.85. However, Sandisk’s EPS growth in Q1 and the guidance for Q2 indicate that it could outpace analysts’ expectations, and that could set the stock up for big gains over the coming year.
Wall Street expects big gains from Sandisk, but it could do better
Sandisk’s 12-month median price target of $2,167 implies 88% gains, which is quite healthy. However, the stunning earnings growth the company has been clocking indicates that it can do better than that.
I say this because of the stock’s dirt cheap valuation. Sandisk trades at just 9 times earnings, well below the S&P 500 index’s earnings multiple of 23. The S&P 500’s average earnings are anticipated to increase by 33% this year. Sandisk, therefore, deserves to trade at a premium to the S&P 500.
Let’s say the stock trades at even 15 times earnings at the end of fiscal 2027, which will end in early July next year, and it clocks $226.85 in EPS (in line with consensus expectations); its price could reach $3,403. That’s nearly 3x Sandisk’s price right now, indicating that it has the potential to become a multibagger given its red-hot growth and attractive valuation.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
