Sandisk Shares Are Down 40% Since Earnings, but Is the Stock a Buy?

Sandisk released its fiscal first-quarter earnings report on Oct. 29. Here’s Morningstar’s take on SanDisk’s earnings and stock.

Key Morningstar Metrics for Sandisk Stock

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

What We Thought of Sandisk’s Fiscal Q1 Earnings

Sandisk’s 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 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.

The bottom line: We cut our fair value estimate for no-moat Sandisk to $870, from $1,000, to reflect a lower price peak in the short term and a consistent downcycle view thereafter. Shares have fallen about 40% since the report, but still don’t look undervalued to us.

The following are excerpts from Morningstar’s company report on Sandisk.

Fair Value Estimate for Sandisk

With its 3-star rating, we believe Sandisk stock is fairly valued compared with our long-term fair value estimate of $870 per share. We forecast highly volatile cyclical results for Sandisk over the next five years, led by pricing cyclicality. In fiscal 2028, we expect prices to peak as a glut of new supply comes online across the market, and we expect a severe downturn starting in fiscal 2029 and continuing through 2031.

We expect Sandisk’s gross margin profile to fluctuate significantly with market NAND pricing, as Sandisk is a high fixed-cost business. We expect gross margin to remain in the mid-80% range in fiscal 2027, driven by superb NAND pricing. We forecast compression during a 2029 and 2030 downcycle, and expect margins to steadily come down toward our historical midcycle views after fiscal 2031.

Read more about Sandisk’s fair value estimate.

Economic Moat Rating

We assign Sandisk a Morningstar Economic Moat Rating of none. We view flash memory chips as commodities that don’t command any pricing power, instead being governed by market supply/demand dynamics that determine pricing. Furthermore, flash chip manufacturing is incredibly capital-intensive, which weighs down returns on invested capital. We believe Sandisk can earn positive economic returns for short periods in a strong market cycle, but don’t believe these are durable over the long run.

Read more about Sandisk’s economic moat.

Financial Strength

We expect Sandisk to generate immense cash flow in the medium term and remain unleveraged. We liked the firm’s initial capital structure after the spinoff in 2025, with $2.0 billion in debt and $1.5 billion available in a revolving credit facility. SanDisk quickly paid off its debt and holds $6.5 billion in cash and marketable securities as of June 2026.

Sandisk has a choppy history of free cash flow, but we expect immense generation over the coming years during an unprecedented NAND upcycle. With the new champagne problem of what to do with all its cash, we expect robust repurchases, as the firm doesn’t currently pay a dividend.

Read more about Sandisk’s financial strength.

Risk and Uncertainty

We assign a Very High Uncertainty Rating to Sandisk, resulting from the cyclical volatility of the global NAND flash chip market. Historically, Sandisk has been exposed to periods of market oversupply that can pressure prices, revenue, and profitability. We expect this cyclicality to continue in the long term, even though the current upcycle is immense.

We also believe the rise of Chinese competitor Yangtze Memory Technologies poses an additional risk to Sandisk. Finally, Sandisk is a nascent stand-alone business, and we believe operational risk creates uncertainty for investors. Its lack of stand-alone operating history makes operating expense management a meaningful unknown. Still, we like that former Western Digital CEO David Goeckeler, who led the combined firm, is overseeing Sandisk as CEO.

Read more about Sandisk’s risk and uncertainty.

SNDK Bulls Say

• Robust AI infrastructure demand is driving incredibly tight NAND supply, massive pricing growth, and terrific sales and profitability. If AI demand growth remains rapid, NAND supply could stay tight through 2030, carrying Sandisk to new highs
• Sandisk is investing to raise its market share in enterprise SSDs for cloud infrastructure, which we see as a higher-profit business.
• New AI model architectures that utilize higher NAND memory capacity could further augment the demand for NAND in an AI era and boost results even further.

SNDK Bears Say

• Sandisk sells commodity-like NAND flash memory chips and offers little differentiation or pricing power, exposing it to volatile cyclicality.
• Sandisk faces steep and volatile risk from longer-term NAND market cyclicality. If additional supply coming online creates a pricing crash, Sandisk risks steep declines in sales and profits.
• Sandisk holds the lowest share among peers in the higher-profit, highest-growth enterprise SSD segment of the market.

This article was compiled by Colin Laidley.