Morningstar

SanDisk Earnings: Lowering Fair Value Estimate; Decelerating Price Growth Is a Bad Omen

Shares have fallen from 2026 highs recently, but they still look overvalued to us.

Sandisk signage is displayed outside their headquarters.
Aaron M. Sprecher via AP
Securities in This Article
SanDisk Corp Ordinary Shares
(SNDK)

Key Morningstar Metrics for SanDisk

  • Fair Value Estimate
    : $870.00
  • Morningstar Rating
    : ★★
  • Morningstar Economic Moat Rating
    : None
  • Morningstar Uncertainty Rating
    : Very High

What We Thought of SanDisk’s Earnings

SanDisk’s SNDK September-quarter results were again exceptional and above guidance. Sales rose 378% year on year to $11 billion, while non-GAAP gross margin rose 55 points year on year to 85%. December-quarter guidance implies further improvement and year-on-year growth again above 300%.

Why it matters: Sky-high pricing continues to drive results, but it looks to be decelerating sequentially. To us, this indicates a pricing peak is on the horizon, in line with our thesis. Pricing is decelerating earlier and more quickly than we expected, and we still expect a severe downcycle after the peak.

  • Management continues to cite long-term agreements as creating a structurally high pricing environment. We disagree. We see customers holding strong leverage to renegotiate or walk away if and when market prices fall below contracted levels.
  • We don’t question strong AI demand growth, but we believe a major capacity buildout between 2027 and 2029 will bring prices back down. We see evidence to our thesis in recent results and guidance, with pricing growth decelerating quickly and revenue becoming volume-led.

The bottom line: We cut our fair value estimate for no-moat SanDisk to $870 per share from $1,000 to reflect a lower price peak in the short term and a consistent downcycle view thereafter. Shares have fallen from 2026 highs recently, but they still look overvalued to us.

  • Sandisk is up more than five times year-to-date, but down more than 40% from a peak in June. The market has grown concerned about AI spending and memory supply buildouts, including from China. We see further downside when a downcycle manifests, making this a risky bet for investors.
  • We still expect impressive growth through 2028, but see prices peaking in early 2028 and growth in the next few quarters to be volume-led. We then forecast a severe downturn between 2029 and 2031 as the market tilts into oversupply.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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