Sandisk Stock Is Up More Than 5,900% Since It Spun Off From Western Digital. Is It Too Late to Buy?

Sandisk's (NASDAQ: SNDK) incredible journey since its February 2025 spinoff from Western Digital has captured widespread attention from artificial intelligence (AI) investors. Sandisk stock closed its first trading day at around $36. As of market close on Friday, shares were changing hands at $2184.75 -- a gain of close to 6,000%.

While this performance reflects powerful artificial intelligence (AI)-driven tailwinds for the business, it naturally raises the question of whether Sandisk stock is priced to perfection or still has room to run. By evaluating the state of the current memory and storage supercycle, the company's valuation profile, and recent analyst price target revisions, smart investors can gain a clearer picture of whether further meaningful appreciation remains possible.

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Why is Sandisk stock so high?

In order to efficiently handle AI training and inference deployments, AI data centers require enormous volumes of high-bandwidth, low-latency storage. As a leading producer of NAND flash memory and enterprise solid-state drives (SSDs), Sandisk has benefited from rapidly growing demand from deep-pocketed hyperscalers, limited supply, and a long time lag for bringing new production capacity online.

These dynamics have created ongoing tightness in NAND markets, which has improved memory-chip makers' pricing power enormously. For focused memory-sector players like Sandisk, profit margins and revenues have soared. Unlike the cyclical memory booms of the past, the current environment features more structural demand from AI infrastructure that analysts expect to extend well into 2027 and 2028.

The recent implementation of multiyear supply agreements further stabilizes Sandisk's financial trajectory. These tailwinds explain much of the stock's rally and suggest that its fundamental business drivers remain intact rather than exhausted.

What does Wall Street think of Sandisk?

Among the 21 Wall Street analysts covering Sandisk stock, 86% have a buy or equivalent rating on it. While their 12-month price targets vary widely, recent updates from Barclays, Susquehanna, and Mizuho have put price targets exceeding $2,200 per share on it. Among all analysts, however, the average price target is $1,863 -- suggesting shares are a tad overbought at the moment.

Is Sandisk stock a buy right now?

Any investor considering adding Sandisk stock to their portfolio now should first look at the company's forward price-to-earnings (P/E) ratio. Currently, Sandisk's forward P/E stands above 33. As the chart below illustrates, Sandisk has experienced a dramatic valuation expansion throughout the past year.

SNDK PE Ratio (Forward) data by YCharts.

Some investors may argue that Sandisk's multiple appreciation was reasonable and warranted for a company delivering rapid earnings growth in a high-margin environment. In other words, the company's valuation simply looks elevated because earlier periods reflected its lower profitability before the digital storage supercycle intensified.

Indeed, growth stocks in the technology sector often command premium multiples during expansion phases. With that said, I think current trends indicate that Sandisk stock already reflects quite a bit of optimism. While it may not be obviously overvalued relative to its prospects, I would temper my expectations as to whether its recent run-up can be sustained in the near term.

While Sandisk is a compelling opportunity for AI-themed portfolios, I think chasing its current momentum could be dangerous. Using a strategy of dollar-cost averaging over a multiyear period would be the best way to build a position in such a rapidly appreciating name, and would allow investors to avoid the trap of trying to time its next breakout.

Citigroup is an advertising partner of Motley Fool Money. Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Western Digital. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.