Why Sandisk Stock Popped Again Today
Key Points
Melius Research initiated coverage on Sandisk with a buy rating and a $1,350 price target.
Semiconductor stocks are usually cyclical, but Melius thinks this time is different.
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Sandisk (NASDAQ: SNDK) stock closed last week at an all-time high near $990 a share -- and it's starting this week right, too.
Shares of the computer memory-maker jumped 4.2% through 10 a.m. this morning after Melius Research initiated coverage with a buy rating and a $1,350 price target. The analyst believes Sandisk shares will rise another 36% over the next 12 months.
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Why Melius loves Sandisk
Sandisk makes computer memory, which works in tandem with fast artificial intelligence chips to power the AI revolution. Melius argues in a note covered on TheFly.com this morning that this revolution is still in early innings -- and may last "through the end of the decade."
As Melius explains, demand for high-bandwidth memory and the high profit margins Sandisk is earning from it are both "unusual." Stock market investors are having a hard time believing demand will last long, or profit margins remain high long -- anticipating instead that the semiconductor market will do what it always does, and turn from an up-cycle into a down-cycle relatively quickly.
Once investors realize this time is different, however, they'll pay higher multiples to earnings for Sandisk -- and the stock will go higher.
What's next for Sandisk stock?
But what if Melius is wrong? What if the semiconductor industry remains as cyclical as it always has been? What if this time is not different?
Sandisk spent three years losing money before finally turning profitable this year. Most analysts see earnings hitting $41.75 in 2026, growing past $107 in 2027 -- then starting to fall in the traditional cyclical pattern. And yet, even in 2030, forecasts have Sandisk earning $43 a share, which is more than it might make this year.
With the stock trading under 25 times earnings both now and then, Sandisk looks cheap.
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Rich Smith 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.
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