SanDisk Stock Price Forecast: Shares Fall 8% Despite Revenue Surge; Can AI Storage Demand Drive Further Gains?

TradingKey - As of August 5 Eastern Time, SanDisk ( SNDK) released its fourth-quarter fiscal results after the U.S. market close. Although the company's fourth-quarter performance significantly beat market expectations and its AI data center business continued to grow rapidly, SanDisk's stock experienced profit-taking and fell 8% after hours, as the market had already priced in expectations of an AI storage rally, leading to excessive cumulative gains, and its next-quarter guidance failed to fully meet the expectations of some investors.

Why SanDisk Stock Price Is Falling?

SanDisk's shares fell about 8% in after-hours trading after the company released its latest earnings report. From the financial data, the company's quarterly performance maintained strong growth, but some future growth indicators fell short of previous market expectations, leading to a pullback in the stock price.

According to the financial report, SanDisk's fourth-fiscal-quarter revenue reached $8.97 billion, up 372% year-over-year and beating the market expectation of $8.48 billion. Adjusted earnings per share reached $39.25, higher than analysts' expectations of $34.96. Meanwhile, the company's gross margin rose to 84.6%, reflecting a recovery in memory prices and an increased share of high-value products, which drove a significant improvement in profitability.

In terms of business performance, the data center business continued to be the main driver of growth. SanDisk benefited from increased demand for AI server construction and rising demand for enterprise SSDs, which drove rapid growth in data center-related revenue. SanDisk CEO David Goeckeler stated that the company is improving business stability through multi-year customer agreements, having already signed long-term supply agreements with multiple customers totaling approximately $93.9 billion, with more and more capacity expected to be locked in through long-term contracts over the next few years.

However, the drop in stock price following the earnings release was primarily related to the company's guidance for future quarters and the sustainability of growth, which remains a key focus for the market.

Regarding guidance, SanDisk expects revenue for the next quarter to be between $10.3 billion and $10.8 billion. While this forecast still indicates that the company's revenue will maintain rapid growth, it fell short of Wall Street analysts' previous expectations of over $10.8 billion. As a result, following the earnings release, investors reassessed the room for future growth, leading to the decline in the stock price.

In addition, market attention on SanDisk's AI storage business has continued to rise. Although the company's data center business has grown strongly, investors want to see clearer drivers for future revenue from AI order growth, enterprise SSD demand, and long-term supply agreements. Since AI storage has become the core logic of current market trading, simple earnings growth is no longer sufficient to meet investor expectations; the market needs to see stronger growth signals.

Another factor is the cyclical risk of the storage industry. While NAND prices are currently improving and AI server demand is driving growth in the enterprise SSD market, future capacity increases by manufacturers such as Samsung, Micron, and SK Hynix could alter the storage supply and demand dynamics, thereby affecting the sustainability of price increases and profit margin levels.

Can SanDisk Stock Still Rise?

From a medium-to-long-term perspective, AI storage demand remains an important driver supporting SanDisk's stock price.

As tech giants such as Microsoft ( MSFT ), Amazon ( AMZN ), Google ( GOOGL ), Meta ( META) continue to expand their investments in AI infrastructure, the demand for high-performance, high-capacity storage in AI servers continues to rise. Compared to traditional servers, AI training and inference tasks need to process larger scales of data, placing higher requirements on enterprise SSDs, which provides new growth space for SanDisk.

Currently, SanDisk is gradually reducing its reliance on the consumer flash memory market and shifting its growth focus to the data center business. The latest financial results show that the data center business has become the company's fastest-growing segment, while enterprise SSD products also command higher profit margins, helping to improve the overall profitability structure.

In addition, long-term supply agreements are reshaping SanDisk's historically highly cyclical business model. In the past, the NAND industry frequently went through a cycle of 'price hikes - capacity expansion - oversupply - price drops,' whereas long-term contracts can help the company lock in demand in advance and improve capacity planning capabilities.

Market views suggest that AI data center construction is still in its early stages, and enterprise storage demand is likely to maintain rapid growth over the next few years. If AI capital expenditures continue to expand, SanDisk is expected to continue to benefit from the storage upgrade cycle.

However, there is still some pressure on the stock price in the short term.

First, valuations have risen significantly. SanDisk previously recorded massive gains, and if future earnings growth fails to continuously exceed market expectations, the stock price may continue to undergo valuation digestion.

Second, industry competition risks remain. Samsung, Micron ( MU ), and SK Hynix are all expanding their AI storage footprints, and future increases in supply could impact the upside potential of NAND prices.

Third, the market needs to observe whether AI demand actually translates into long-term orders. If cloud computing giants reduce capital expenditures in the future, it could affect the growth of enterprise SSD demand.

SanDisk Stock Price Technical Analysis

SanDisk Daily Stock Price Chart, Source: TradingView

According to the daily chart of SanDisk's stock price, after hitting an all-time high of $2,354.39, the stock has recently undergone a continuous correction of over 50%, indicating that market sentiment is leaning bearish. Meanwhile, the stock price fell below its 144-day moving average on July 29, further strengthening bearish momentum in the market.

At present, although the stock price has staged a rebound over the last few trading days, it weakened again after rising to the resistance level at the 0.618 Fibonacci retracement level of $1,432, suggesting that the stock may continue to fall in the short term. The initial downside target will be to test the psychological level of $1,000; if this level fails to hold, the stock price could decline further toward the 0.786 Fibonacci retracement level near $907.

On the upside, the initial resistance level to watch is near $1,432. If the stock price breaks through and consolidates above this level, it could open up room for further gains toward the $1,700 mark, with the next level of interest at $1,900.