Sandisk (SNDK) shares fell about 7% on Thursday, a sharp reaction given the flash memory maker had just posted fourth-quarter revenue of $8.97bn, up 51% on the previous quarter, with adjusted earnings of $39.25 a share against forecasts of $34.96.
So why did the shares fall, when the results beat almost every number Wall Street had pencilled in? Because the outlook for the new quarter didn’t match the bar the market had set.
Why a beat still felt like a miss
Sandisk guided to revenue of $10.3bn to $10.8bn, with the midpoint landing just under the $10.82bn Wall Street wanted, which was enough to trigger a rush for the exit.
Gross margin guidance also stepped down, to 83% to 85% from the 84.6% just reported, and for a share priced for perfection, even a modest slowdown can spook holders.
The datacentre shift underneath it all
Datacentre revenue reached $2.98bn in the quarter, more than double the prior three months, while full-year datacentre revenue climbed 437% year on year.
That segment carries far higher margins than the consumer memory cards Sandisk built its name on, and now makes up a much bigger slice of the business than it did a year ago.
Since April the company has also signed five further New Business Model agreements, which lock in multi-year demand rather than leaving Sandisk exposed to NAND’s usual boom-and-bust pricing.
What $5,000 becomes if the bulls are right
Eight brokers carry an average price target of around $2,056, roughly 63% above Thursday’s $1,258.58, with Evercore, Bernstein and Goldman Sachs targeting $2,200 to $3,000.
A $5,000 stake today buys just over five shares, and if that average target is hit within twelve months, the stake could grow to around $8,150, though targets can miss either way.
RBC and Wells Fargo both rate the shares a Hold, with targets closer to today’s price, while Citi has already trimmed its own.
The board added $14bn to the buyback too, taking remaining authorisation to $15.5bn, suggesting it doesn’t expect growth to stall.
Is the rally over, or just catching its breath?
The shares are still up around 469% this year and over 3,000% across the past twelve months, so a pullback this size after such a run is almost inevitable rather than a warning sign.
That said, the risks are real, because NAND pricing has driven most of this rally, and if supply loosens or hyperscaler spending slows, margins could compress faster than guidance suggests.
Even so, the fundamentals behind Thursday’s dip look stronger than the reaction implies. Between the datacentre shift, the locked-in NBM agreements and a board buying back stock at these levels, I remain bullish on Sandisk, and would treat further weakness as worth watching rather than a reason to walk away.
