Why Sandisk Stock Skyrocketed 143% in January

Shares of Sandisk (NASDAQ: SNDK) were soaring last month as the maker of NAND flash memory chips and other memory products benefited from a continuing shortage in the memory sector due to the AI boom.

Sandisk blew past estimates in its second-quarter earnings report at the end of the month, though there was not much direct news out on the company.

The stock benefited from reports in the media of memory prices going up, as evidenced by commentary from companies like Intel and Apple on their earnings calls. Several Wall Street analysts also raised their price targets on the stock during the month, keeping up with Sandisk's scorching-hot bull run.

According to data from S&P Global Market Intelligence, the stock finished the year up 143%. As the chart below shows, the stock gained in nearly every session last month.

SNDK data by YCharts

Why Sandisk keeps soaring

Sandisk's biggest day of the month came on Jan. 6 when the stock soared in response to comments from Nvidia CEO Jensen Huang that AI storage is a "completely unserved market," and he predicted that it would become the largest data storage market in the world. Additionally, TrendForce noted that NAND flash contract prices were expected to rise 33%-38% in the first quarter.

A few days later, the stock jumped again after Nomura said that Sandisk would double the price of its high-capacity 3D NAND memory devices for solid-state drives this quarter.

Several Wall Street analysts raised their rating on the stock to reflect expectations around those higher prices and the supply crunch, and Sandisk validated those moves when it reported second-quarter earnings at the end of the month.

In the second quarter, Sandisk's revenue rose 31% sequentially and 61% on a year-over-year basis to $3.03 billion, well ahead of the consensus at $2.69 billion. It also smashed estimates on the bottom line as adjusted earnings per share jumped from $1.23 a year ago to $6.20, reflecting a surge in prices that led to adjusted gross margin increasing from 32.5% to 51.1%.

CEO David Goeckeler called out the "critical role that our products play in powering AI."

Image source: Getty Images.

How high can Sandisk go?

For the third quarter, Sandisk forecast revenue of $4.4 billion-$4.8 billion and adjusted earnings per share of $12-$14, doubling from the second quarter.

Memory is notoriously cyclical, but this upswing could go for at least a few more quarters. As long as prices are rising and Sandisk's profits are increasing, there's a good argument for the AI stock to continue moving higher.

Jeremy Bowman has positions in Nvidia. The Motley Fool has positions in and recommends Apple, Intel, and Nvidia. The Motley Fool has a disclosure policy.