Key Points
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Sandisk reported solid results, but the stock continues to remain under pressure due to factors outside its control.
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The recently announced stock split could increase demand for Sandisk’s shares.
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Micron Technology will release its quarterly results in December, and I won’t be surprised to see it follow Sandisk’s footsteps.
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Micron and Sandisk still have impressive growth potential, and the recent stock price action suggests that investors are getting a great deal on these stocks.
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Sandisk (NASDAQ:SNDK) recently released stunning results for the first quarter of fiscal 2027 (for the three months ended Oct. 2), which easily exceeded the market’s expectations. Even better, the company’s guidance for the current quarter is stronger than expected, suggesting that the favorable business conditions in the NAND flash storage market are sustainable.
Sandisk management also announced that it will execute an 8-for-1 forward stock split to “make stock more accessible, including to employees through its employee stock purchase plan.” Sandisk will start trading on a split-adjusted basis from Nov. 20. But why has Sandisk made this move, and will fellow memory manufacturer Micron Technology (NASDAQ:MU) follow suit when it releases its results in December?
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Let’s find out.
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A stock split could give Sandisk a much-needed boost
I had noted in May this year that Sandisk is likely to opt for a stock split owing to its high share price. Though the stock has been under pressure lately, it has appreciated by more than 2,700% since it was spun off from Western Digital in February last year.
Each share of Sandisk trades at just over $1,000, as of this writing. The proposed stock split will bring down the price of each Sandisk share to around $125. However, the outstanding share count of the company will increase simultaneously, which means that the overall value of your Sandisk investment won’t change.
For example, if you own 10 shares of Sandisk right now, you’d own 80 after the split is completed, though the price of each share will be lower. So, a stock split is just a cosmetic move that doesn’t change a company’s fundamentals. However, as management noted in the press release, a lower share price will make the stock “more accessible.”
In simpler words, the lower per-share price increases the affordability of Sandisk stock, giving retail investors a better shot at buying it. The potential increase in demand for Sandisk stock once it starts trading on a split-adjusted basis could pave the way for more upside, especially considering its solid financial performance.
Its revenue in the previous quarter jumped nearly 5x from the year-ago period to just over $11 billion. Non-GAAP earnings per share (EPS), meanwhile, shot up by 40x year over year to $49.51. However, the stock fell more than 13% following its latest quarterly report, primarily due to a broader sell-off in tech stocks. What’s worth noting is that Sandisk expects its terrific momentum to continue in the current quarter.
The company expects $55.00 in EPS on $12.4 billion in revenue. For comparison, it posted EPS of $6.20 and revenue of $3 billion in the year-ago period. Ideally, the stock should have surged following such phenomenal numbers, but that wasn’t the case. But now that Sandisk will be accessible to a wider investor pool following its stock split, I won’t be surprised to see it step on the gas once again.
That’s precisely the reason why I think even Micron Technology management could opt for a stock split.
Here’s why Micron could follow Sandisk and go for a stock split
Micron stock has surged nearly 1,000% over the past three years. As a result, each share of Micron now trades at almost $800, as of this writing. Just like Sandisk, even Micron has been delivering outstanding growth quarter after quarter, driven by strong memory demand.
The company’s revenue in fiscal 2026 (which ended on Sept. 3) increased by 256% from the prior year to $133.2 billion. Adjusted EPS increased by over 9x from the year-ago period to $75.52. The incredible growth in Micron and Sandisk’s revenue and earnings can be attributed to the artificial intelligence (AI)-fueled demand for memory chips.
Both dynamic random-access memory (DRAM) and NAND flash storage are in short supply, as AI data centers have been consuming large numbers of these chips to store and transport huge amounts of data. Micron noted on its September earnings call that it expects “memory and storage supply-demand conditions to be much tighter in fiscal 2027 and 2028 than they were in 2026.”
However, Micron’s shares are down 34% since reaching a 52-week high in June. So, a stock split could increase demand for Micron’s shares by lowering the per-share price. Also, Micron’s cheap valuation means that a more accessible share price could spur demand for the stock.
After all, Micron trades at just 4.6 times forward earnings, while the S&P 500 index has a forward earnings multiple of 19. As memory supply conditions tighten over the next couple of years, Micron will be able to sustain the impressive earnings growth it has been delivering. That’s why I won’t be surprised to see this semiconductor stock step on the gas once again, and a stock split announcement when it releases another set of solid quarterly results next month could trigger a bull run.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Western Digital. The Motley Fool has a disclosure policy.
