Wall Street Likes SanDisk More Than Micron. Should You?

Everybody loves a winner. But when deciding between two winning growth stocks, should you pick the one with the more impressive recent performance? Many analysts seem to think so.

Micron Technology's (NASDAQ: MU) shares have soared more than 330% over the last 12 months. However, that gain pales in comparison to SanDisk's (NASDAQ: SNDK) sizzling 12x return. It's not surprising that Wall Street likes SanDisk more than Micron. Should you?

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The important Wall Street tell

At first glance, you might think that Wall Street actually prefers Micron over SanDisk. An analysis of analysts' stock recommendations suggests that's the case.

S&P Global (NYSE: SPGI) surveyed 20 analysts this month who cover SanDisk. Fourteen of them (70%) rated SanDisk a "buy" or "strong buy," while the remaining six recommended holding the stock. However, 37 of the 43 analysts surveyed by S&P Global (86%) who cover Micron rated it as a "buy" or better.

Is my statement that Wall Street likes SanDisk more than Micron wrong? I don't think so. Analysts' 12-month price targets are a better indicator of their sentiment than their ratings, in my opinion.

The consensus Wall Street 12-month price target for SanDisk reflects a potential upside of 19%. What's the consensus view for Micron? The average analyst price target for the stock is slightly below the current share price. I think that's a clear sign that Wall Street favors SanDisk over Micron.

Two different yet booming businesses

While both Micron and SanDisk are semiconductor stocks targeting memory chips, their businesses are quite different. Micron's products include dynamic random-access memory (DRAM), NAND flash memory, and high-bandwidth memory (HBM). SanDisk only focuses on NAND memory.

Both companies are delivering robust growth. Micron's revenue jumped roughly 57% year over year in its latest quarter. SanDisk's revenue increased by 31%.

Micron and SanDisk are also enjoying similar pricing power due to significant supply demand imbalances for their respective products. Micron completely sold out its HBM supply for 2026. CEO Sanjay Mehrotra noted a "tight supply environment" that will "persist beyond calendar 2026" during the company's first-quarter earnings call. That echoes SanDisk CEO David Goeckeler's statement in his company's recent quarterly call that SanDisk foresees "customer demand well above supply beyond calendar year 2026."

There's a common denominator behind Micron's and SanDisk's good fortunes: a sustained demand for AI chips. Micron's HBM is critical for speeding up AI processing. The NAND flash memory made by both companies is essential for meeting AI storage challenges.

HBM could become even more important with increasingly powerful AI accelerators -- good news for Micron. Meanwhile, SanDisk has partnered with South Korean memory chipmaker SK Hynix to develop High Bandwidth Flash (HBF). This technology holds the potential to become the next-generation memory standard for AI inference.

Thinking long term

An investor who is unfamiliar with Micron and SanDisk might be surprised to learn how low their valuations are. Micron's shares trade at only 12.7 times forward earnings, while SanDisk's forward price-to-earnings ratio is 15.8.

Micron's lower valuation is one reason I view the stock as a better pick than SanDisk, unlike Wall Street. However, a more important factor behind my preference for Micron is understanding why both of these stocks have low forward earnings multiples.

Both Micron and SanDisk are cyclical stocks. Savvy investors know that the current boom cycle won't be permanent. This cyclicality is the main reason I think Micron's diversification into multiple types of memory chips will be an advantage over the long term.

SanDisk has been the bigger winner over the last 12 months. But I suspect that Micron will be like the tortoise in Aesop's fable, "The Tortoise and the Hare," albeit an especially fast-moving tortoise. The tortoise ultimately won the race against the hare. I predict that Micron will outperform SanDisk, too.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and S&P Global. The Motley Fool has a disclosure policy.