Sandisk's Stock Is up 2,000% in a Year - and This Analyst Says It's Still Being Underestimated

Dow Jones04-10

Sandisk's stock has already climbed more than 2,000% over the past year, and one analyst sees a scenario where it could rocket nearly 300% further.

Admittedly, that's Bernstein analyst Mark Newman's "blue-sky" scenario linked to a very rosy "bull-case" setup in which the company experiences a "higher and more sustained pricing peak" for its NAND memory offerings. If average selling prices grow 75% sequentially in the March quarter and another 75% sequentially in the June quarter, Newman sees the potential for Sandisk's stock $(SNDK)$ to hit $3,000, up from $829 today.

But his more traditional "base-case" scenario lays out the potential for serious upside, linked to a new $1,250 price target that's about 60% above Wednesday's closing levels. That's based on an assumption that growth in NAND average selling prices peaks at 55% sequentially in the March quarter and then comes down to 40% sequentially in the June quarter.

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The base-case scenario could translate to $14.18 in adjusted earnings per share for the fiscal third quarter, above the $14.04 FactSet consensus, and $25.30 in the June quarter, above the $19.36 consensus view.

"We think the market is significantly undervaluing earnings power and sustainability of this cycle," Newman said. Sandisk reports its March-quarter results after the closing bell on April 30.

Memory prices have been rising fast, and NAND memory is "showing the strongest increases and continued acceleration," Newman said in a Thursday note. That bodes well for Sandisk (SNDK), which makes NAND flash-based products such as solid-state drives, which are in high demand for artificial-intelligence data centers.

He brushed off fears about Google's $(GOOGL)$ $(GOOG)$ TurboQuant compression algorithm that reduces key-value cache memory in AI models by at least six times and increases speeds by up to eight times. While some investors have worried that this will cut into memory demand and pricing power, Newman is in the camp of those who believe the development could drive even greater interest in memory products.

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