Company Reports

Sandisk hosted a bullish investor day on Aug. 13, focusing on long-term secular demand trends for NAND memory, AI, and long-term customer contracts. Management provided attractive long-term targets, including double-digit revenue growth through 2030 and 80% non-GAAP gross margin.

We believe Sandisk is prone to market-driven cyclicality in memory chips and doesn’t hold pricing power over its customers, which leads to low and volatile profitability over the course of a cycle. We consider NAND flash memory chips as a commodity and see high fungibility among flash chipmakers’ offerings. In periods of tight supply and strong market pricing, Sandisk’s profit margins can be robust. We see this in the current immense upcycle, led by artificial intelligence demand. However, these periods are often followed by a glut of oversupply, which pressures pricing and can lead to profit compression. Our long-term expectations for cyclicality in the business and commodity, low-margin products inform our view that Sandisk doesn’t hold an economic moat. We expect rising NAND demand over the medium term, but for supply/demand alignment to fluctuate, leading to market cycles for pricing regardless of strong demand.

Sandisk reported strong upside to June-quarter guidance and a bullish September-quarter outlook. Sales rose more than 370% year over year to $9.0 billion, and guidance implies year-over-year growth of more than 350%. Shares fell 5% after-hours as guidance missed lofty consensus expectations.

We believe Sandisk is prone to market-driven cyclicality in memory chips and doesn’t hold pricing power over its customers, which leads to low and volatile profitability over the course of a cycle. We consider NAND flash memory chips as a commodity and see high fungibility among flash chipmakers’ offerings. In periods of tight supply and strong market pricing, Sandisk’s profit margins can be robust. We see this in the current immense upcycle, led by AI demand. However, these periods are often followed by a glut of oversupply, which pressures pricing and can lead to profit compression. Our long-term expectations for cyclicality in the business and commodity, low-margin products inform our view that Sandisk doesn’t hold an economic moat. We expect rising NAND demand over the medium term, but for supply/demand alignment to fluctuate, leading to market cycles for pricing regardless of strong demand.

We believe Sandisk is prone to market-driven cyclicality in memory chips and doesn’t hold pricing power over its customers, which leads to low and volatile profitability. We consider NAND flash memory chips as a commodity and see high fungibility among flash chipmakers’ offerings. In periods of tight supply and strong market pricing, Sandisk’s profit margins can be robust. However, these periods are often followed by a glut of oversupply, which pressures pricing and can lead to profit compression. Our long-term expectations for cyclicality in the business and commodity, low-margin products inform our view that Sandisk doesn’t hold an economic moat. We expect rising NAND demand over the medium term, but for supply/demand alignment to fluctuate, leading to market cycles for pricing.

Sandisk reported blowout March-quarter results and June-quarter guidance. Prices rose more than 130% sequentially and more than 200% year over year. Revenue rose 250% year over year to $5.95 billion, and non-GAAP gross margin expanded 5570 basis points to 78.4%.

We believe Sandisk is prone to market-driven cyclicality in memory chips and doesn’t hold pricing power over its customers, which leads to low and volatile profitability. We consider NAND flash memory chips as a commodity and see high fungibility among flash chipmakers’ offerings. In periods of tight supply and strong market pricing, Sandisk’s profit margins can be robust. However, these periods are often followed by a glut of oversupply, which pressures pricing and can lead to profit compression. Our long-term expectations for cyclicality in the business and commodity, low-margin products inform our view that Sandisk doesn’t hold an economic moat. We expect rising NAND demand over the medium term, but for supply/demand alignment to fluctuate, leading to market cycles for pricing.

Sandisk's December-quarter results and March-quarter guidance blew all expectations out of the water. December earnings doubled FactSet consensus estimates, while March-quarter earnings guidance is more than triple the consensus estimate.

Sandisk's September-quarter results crushed guidance, with sales rising 23% year over year to $2.3 billion. December-quarter guidance was even more impressive, calling for 13% sequential sales growth and 1,200 basis points of sequential gross margin expansion.

We believe Sandisk is prone to market-driven cyclicality in memory chips and doesn’t hold pricing power over its customers, which leads to low and volatile profitability. We consider NAND flash memory chips as a commodity and see high fungibility among flash chipmakers’ offerings. In periods of tight supply and strong market pricing, Sandisk’s profit margins can be robust. However, these periods are often followed by a glut of oversupply, which pressures pricing and can lead to profit compression. Our long-term expectations for cyclicality in the business and commodity, low-margin products inform our view that Sandisk doesn’t hold an economic moat. We expect rising NAND demand over the medium term, but for supply/demand alignment to fluctuate, leading to market cycles for pricing.

Sandisk's June-quarter results beat guidance on the top and bottom lines. Revenue rose 8% year over year and 12% sequentially to $1.9 billion, while non-GAAP gross margin rose 370 basis points sequentially to 26.4%. Guidance calls for sequential sales growth and margin expansion.

We believe Sandisk is prone to market-driven cyclicality in memory chips and doesn’t hold pricing power over its customers, which leads to low and volatile profitability. We consider NAND flash memory chips as a commodity and see high fungibility among flash chipmakers’ offerings. In periods of tight supply and strong market pricing, Sandisk’s profit margins can be robust. However, these periods are often followed by a glut of oversupply, which pressures pricing and can lead to profit compression. Our long-term expectations for cyclicality in the business and commodity, low-margin products inform our view that Sandisk doesn’t hold an economic moat. We expect rising NAND demand over the medium term, but for supply/demand alignment to fluctuate, leading to market cycles for pricing.

We believe Sandisk is prone to market-driven cyclicality in memory chips and doesn’t hold pricing power over its customers, which leads to low and volatile profitability. We consider NAND flash memory chips as a commodity and see high fungibility among flash chipmakers’ offerings. In periods of tight supply and strong market pricing, Sandisk’s profit margins can be robust. However, these periods are often followed by a glut of oversupply, which pressures pricing and can lead to profit compression. Our long-term expectations for cyclicality in the business and commodity, low-margin products inform our view that Sandisk doesn’t hold an economic moat. We expect demand to be strong for NAND over the medium term, but for supply/demand alignment to fluctuate, leading to market cycles for pricing.

Sandisk's March-quarter revenue declined 1% year over year and 10% sequentially to $1.7 billion, and non-GAAP gross margin declined nearly 1,000 basis points sequentially to 22.7%. Guidance calls for sequential improvements to sales and margin, with midpoints of $1.8 billion and 26.3%, respectively.

We initiated coverage of Sandisk, which recently spun off from Western Digital. Sandisk is the fourth-largest producer of NAND memory in the world, and packages substantially all of its NAND chips into solid-state drives, or SSDs, for data storage in consumer electronics and data centers.