The Sandisk Rally Isn't Over Yet
Key Points
Sandisk has found itself at the center of the AI boom, helping explain the recent rally.
High sequential revenue growth is driven by ongoing shortages of memory products amid rising demand.
Sandisk trades at a reasonable valuation given its strengthening fundamentals.
- 10 stocks we like better than Sandisk ›
It's easy to think that you missed out on an opportunity after a growth stock has trounced the S&P 500, but the Sandisk (NASDAQ: SNDK) rally doesn't seem to be over. The company benefits from a multi-year growth opportunity that sets the stage for accelerated revenue and net income growth.
Sandisk is at the center of AI
When most people think of AI, they immediately think of Nvidia. However, investors can make more money by focusing on smaller components of AI, such as memory chips. Its NAND flash memory technology is critical for AI chips that process substantial amounts of data. Without good memory products, AI chips would experience significant performance drops, and some workloads would stop functioning.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
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Sandisk is a critical part of the AI bottleneck, and more investors have been noticing. That's why the stock is up by more than 4,850% over the past year. Its fundamentals back the move, with net profit margins above 60% and revenue almost doubling sequentially in its fiscal 2026 Q3.
Sandisk CEO David Goeckeler called the quarter a "fundamental inflection point" for the company while touting impressive guidance for its fiscal 2026 Q4. The $8 billion midpoint for Q4 FY26 revenue represents 34.4% sequential growth from the company's blockbuster fiscal 2026 Q3 results.
Sandisk still trades at a good valuation
It's hard to find a growth stock that is up by more than 4,850% over the past year while simultaneously having a good valuation, but Sandisk fits the description. The company has a 67.7 P/E ratio compared to the State Street Technology Select Sector SPDR ETF's 36.8 P/E ratio.
However, almost none of the companies in that tech benchmark are growing as quickly as Sandisk. The NAND flash memory provider has a forward P/E ratio of 30.6. This metric reflects how Sandisk's valuation will become more attractive over time as it continues to deliver exceptional revenue and net income growth rates.
Some of Sandisk's competitors have warned that ongoing memory chip shortages will last throughout 2027 and beyond. Sandisk is already sold out of memory products through 2026 and is seeing heightened demand for 2027.
Sandisk will continue to have a good valuation as long as the AI build-out continues. Memory products will continue to become more expensive due to the perfect storm of supply crunches and rising demand. Those massive tailwinds explain why Sandisk continues to hit fresh highs despite an otherworldly rally over the past year.
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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