Key Points
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Management forecasts fiscal second-quarter adjusted earnings of $55 to $57 a share on a pre-split basis.
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Adjusted earnings per share climbed 26% sequentially in fiscal Q1, easing from 68% growth the previous quarter.
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As recently as early 2025, Sandisk had an adjusted quarterly loss.
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Sandisk (NASDAQ:SNDK) stock sank about 22% on Thursday, Nov. 5, adding to a painful stretch for the flash memory maker. At roughly $806 as of this writing, shares are down about 64% from their June 25 close of $2,335, a record.
Thursday’s slide continued a sell-off in AI data center stocks that started after the Nov. 3 midterm elections, as investors weighed whether the outcome might slow data center construction.
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And it’s been quick. Sandisk closed around $1,330 on Oct. 29, the day it posted fiscal first-quarter results and guided for even higher profits in this quarter. So the growth stock has fallen about 39% over the past week, even though the company’s outlook calls for earnings to keep rising.
I think the sell-off has finally brought the stock to a price worth paying. And Sandisk’s guidance is what I’d use to set it.
Image source: Getty Images.
Earnings are still rising, just more slowly
Showing how much the company has changed, Sandisk’s earnings per share on a non-GAAP (adjusted) basis grew 26% sequentially, to $49.51 in its fiscal first quarter of 2027 (which ended Oct. 2, 2026). That followed sequential gains of 278% in fiscal Q3 of 2026 and 68% in fiscal Q4. Fiscal Q1 revenue came to $11.0 billion, up 23% sequentially and 378% year over year, and data center customers accounted for about $4.8 billion of it. For fiscal Q2, management guided to adjusted earnings of $55 to $57 per share, implying about 13% growth over fiscal Q1 at the midpoint.
Put simply, profits are still climbing. But the growth rate is slowing quickly, and it might keep falling from here.
After all, memory profits can swing fast. A year before, in fiscal Q1 of 2026, Sandisk earned just $1.22 per share on an adjusted basis, with a gross margin of around 30%.
And in the three months ended March 28, 2025, it had an adjusted loss of $0.30 a share.
True, the company looks different now. Data center revenue was under $300 million in the year-ago quarter, and the gross margin has since climbed to 85%. But flash memory is still a product whose price can fall when supply outruns demand, and Sandisk’s earnings would probably drop with it.
The stock is priced for a brief boom
Sandisk’s guidance covers only one quarter, so the simplest way to use it is to annualize it. Four quarters at the $56 midpoint would total about $224 per share in adjusted profit. At around $806, the stock trades at under 4 times those annualized earnings.
In other words, a buyer at today’s price is paying for less than four years of profits at the current pace. Even on actual results, shares sell for about 7 times earnings over the last four quarters.
By comparison, at the Oct. 29 close, shares traded for about 6 times annualized guided earnings.
With a valuation this low, investors seem to expect the boom’s profits to fade within a few years. I think that’s a fair worry for a memory company. It’s also why I wouldn’t pay much more than the stock goes for now.
What would I pay for the stock?
My price is around $900 per share — the point at which four years of earnings at the fiscal Q2 guidance pace would equal what I’d pay. Asking a company this cyclical for much more than four years of boom-level profits feels like too much to me.
The coming stock split changes how that number looks, but not what it means. Every shareholder of record on Nov. 9 gets seven extra shares for each one held. The new shares arrive after the Nov. 19 close, and split-adjusted trading is expected to start Nov. 20. Divided by eight, my $900 price comes to about $112, and the $56 guidance midpoint becomes $7 a share.
At roughly $806, Sandisk is under that price. Sure, a stock that has dropped this far this fast can keep falling. And if flash prices start to slip, the earnings behind my price might follow.
With that in mind, I’d consider taking a small position now, maybe adding to it over time rather than all at once. If the stock gets back above $900 (or $112 after the split) before I buy, I’d hold off.
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Daniel Sparks and his clients do not have positions 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.
