For many stocks, a selloff on earnings would be a bad sign. That isn't the case with memory-maker Sandisk.
Argus Research analyst Jim Kelleher on Friday upgraded Sandisk to Buy from Hold with a 12-month price target of $1,600. Sandisk stock advanced 2.2% to $1,239.13 on Monday.
Kelleher wrote that when he started coverage of the stock in July at Hold, his team would be looking for a better entry point. At the time, Sandisk was trading around $1,757.
"We believe that point has arrived, with the shares at close to half of their peak level," the analyst wrote. "While the more favorable price played a role in our upgrade, we also believe the company is in the early stages of a multiyear period of revenue acceleration and margin expansion."
Sandisk stock ended last week down 0.2%. That slight decline last week, however, doesn't give the full picture.
Sandisk fell 6.8% on Thursday after a disappointing outlook from the memory maker seemed to overshadowed strong results in the latest quarter. Shares followed that up with a 3.7% decline on Friday.
Sandisk, broadly speaking, has been coming back to earth since hitting a record high of $2,335 on June 25. The stock is currently down 47% since then -- dropping well below its 50-day moving average around the $1,679.80 level.
While the share price has come down recently, the business fundamentals are still strong.
Demand for components such as memory are far outpacing supply as customers buy up the hardware needed to help power artificial intelligence. Massive cloud providers, such as Amazon.com, Meta Platforms, and Alphabet, are spending hundreds of billions of dollars to build data centers.
"Given that revenue is growing much faster than costs, we are modeling additional margin expansion going forward," Kelleher wrote.
All of this has set up a good time to buy shares, according to Argus Research.
But while Sandisk stock has recently sold off, it's still on a mammoth run. Shares are up 422% this year and have surged 2,757% over the past 12 months.
With that backdrop, investors have to pick their spots to get in or add to positions. If Argus Research is to be believed, the time might be now.
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