Prediction: Sandisk Will Reclaim Its All-Time High by the End of the Year
Key Points
Sandisk is still gaining market share in the memory chip industry, and its recent results were superb.
A 51% sequential revenue growth rate comes as hyperscalers commit to spending capital over multiple years.
Sandisk trades at a reasonable valuation, with bearish fears about a cyclical slowdown overblown.
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Sandisk (NASDAQ: SNDK) is one of the only growth stocks that can more than quadruple and still be undervalued. Superb fiscal 2026 fourth-quarter results and broader memory chip trends suggest that Sandisk can reclaim its all-time high of just above $2,350 per share.
The stock would almost have to double from its current price to reach that level. Although it may sound difficult to imagine that type of growth, given Sandisk's recent returns, it's entirely feasible.
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Sandisk has the growth numbers of a giant
It's no secret that Sandisk is posting high revenue growth rates, but it truly is on a different level from other chipmakers and tech leaders. Sandisk told investors in its fiscal 2026 third quarter to expect up to $8.25 billion in revenue for its fiscal 2026 fourth quarter, which ended July 3. When the Q4 press release arrived, Sandisk reported $8.97 billion in revenue.
That's a 51% sequential improvement, and guidance for its fiscal 2027 first quarter implies up to $10.8 billion in revenue. That suggests a 20% sequential growth rate.
That growth is moving full steam ahead with superb profit margins. Generally accepted accounting principles (GAAP) net income reached $6.9 billion, which exceeded the company's fiscal 2026 third-quarter revenue.
All of these numbers are incredible. Not even Micron (NASDAQ: MU) is growing this quickly. Sandisk CEO David Goeckeler emphasized in the earnings release that the company is positioned to "generate growing and durable free cash flow." That doesn't sound like a business that is slowing down anytime soon.
Sandisk's valuation cannot stay this low forever
Continuing this fundamental overview of the stock, Sandisk's recent pullback has put its forward price-to-earnings ratio below 20. That provides a higher margin of safety for new investors, and it also makes Sandisk cheaper than most tech giants.
Amazon trades at a 30 forward P/E ratio, while Nvidia and Broadcom have forward P/E ratios of 23 and 21, respectively. None of them is growing as quickly as Sandisk, even though all three are well-positioned for rising AI demand.
Investors bid Sandisk up to a little above $2,350 because they were excited about the fiscal 2026 fourth-quarter guidance. Now, the stock has taken a massive haircut after the company blew past its quarterly expectations and set ambitious first-quarter targets.
The memory chip boom isn't fading anytime soon
The only possible way to view Sandisk in a bearish light is if you believe memory chip prices will eventually crash due to an inventory glut, especially if hyperscalers cut back on AI spending. However, there are no signs that point to that unlikely scenario.
Space Exploration Technologies expects to deliver up to 20 gigawatts of compute capacity by the end of 2027. Meta Platforms intends to build tens of gigawatts this decade and hundreds of gigawatts over time. That's just two hyperscalers, and they all need a lot of memory chips to reach their lofty goals.
Capital expenditure targets for tech companies continue to climb, and high revenue growth for various cloud platforms suggests that AI spending will continue to ramp up. If there were a real risk of a slowdown in capital expenditure, some caution would be warranted.
However, chipmakers and hyperscalers are both pointing to continued growth. Sandisk and its fellow chipmakers forecast meaningful growth in their upcoming quarters. It's not just memory chipmakers, either. Nvidia and Broadcom both projected solid growth rates for their upcoming quarters. Tech giants continue to accelerate market share gains with the help of AI.
Sandisk's recent pullback has more to do with its one-year return than its fundamentals. Many investors think it is natural for a stock to enter a deep correction after surging in a short amount of time. That consensus is misguided for Sandisk, and the chipmaker may be due for an all-time high by the end of the year.
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Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Amazon, Broadcom, Meta Platforms, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.
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