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Fox Advisors lowered its rating on Sandisk from a buy-equivalent to a neutral grade on Monday. This move suggests the firm sees the stock as fairly valued at its current price rather than a standout opportunity to buy more.
While the average analyst target for the company remains much higher at $2,268, this downgrade reflects a more cautious view on how much further the stock can climb in the near term. For long-term owners, one firm moving to the sidelines doesn't change the company's role in the AI data center market, but it does signal that some professionals are waiting for a better price before recommending the stock again.
Source: Fox Advisors
After Sandisk reported its October results, we raised our projections for sales and what the company keeps from every dollar it makes. We have added the profit impact of its investments and its use of cash to buy back its own shares to what we track. We also increased our expectations for how much of the business now comes from data center chips rather than consumer products.
Goldman Sachs set its price target for Sandisk at $2,000, which is significantly higher than where the stock currently trades. This move comes just after the company reported its quarterly results and announced an 8-for-1 stock split. While the target is below the $2,215 average among all analysts who follow the stock, it reflects a positive outlook on the company's growth. Sandisk is currently benefiting from high demand for the specialized flash memory chips used in AI data centers.
Source: Goldman Sachs
Sandisk brought in $11 billion in revenue this quarter, topping the $10.7 billion analysts expected. Profits also came in higher than forecast at $49.51 per share. The company is seeing a surge in demand for its flash memory chips, which are used to store data in the large data centers that power artificial intelligence. Management expects this growth to continue, forecasting even higher sales of roughly $12.4 billion for the next three months.
The company also announced an eight-for-one stock split effective November 19. A stock split divides each existing share into multiple new ones, which lowers the price of a single share without changing the total value of what you own. Sandisk says this will make the stock more accessible to employees and smaller investors. Additionally, the company spent $5 billion buying back its own shares this quarter, a move that reduces the total number of shares and can make each remaining share more valuable over time.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Analysts expect the company to report about 10.7 billion dollars in revenue and earnings of roughly 46.67 dollars per share. Sandisk has beaten expectations for seven quarters in a row, but the focus today will be on how much cloud providers are spending on high-speed flash storage for AI data centers. We are watching for any update on the company's manufacturing costs. Sandisk relies on its proprietary chip architecture to stay more efficient than rivals, and maintaining that cost advantage is the key to keeping profits high even if memory prices move around.
The business is outrunning even the most bullish forecasts. Management has cleared their own profit targets eight times in a row, often by massive margins that suggest they are struggling to keep up with how fast demand is scaling.
| Expectation | |
|---|---|
| EPS | $56.97 |
| Revenue | $12.48B |