SanDisk Gets Wall Street Boost As Rising Chip Prices, Smart Spending Boosts Margins

BofA Securities analyst Wamsi Mohan initiated coverage on SanDisk (NASDAQ:SNDK) with a Buy rating and a price target of $61 on Wednesday.

Mohan noted that SanDisk is a leading developer and manufacturer of data storage devices based on NAND flash technology.

The rerating reflected:

• Improving memory pricing as supply and demand have turned favorable.

• Margins upside given pricing trajectory and operating leverage.

• Better through-cycle economics given the mix of end markets relative to peers.

• A joint venture structure creating a unique shared capex profile.

• Valuation remains attractive.

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The analyst noted that given the near-term supply-demand balance (the first quarter saw supply curtailment), the pricing environment for NAND will become increasingly positive over the next few quarters.

Although the industry remains relatively fragmented (six-plus players), Mohan noted the longer-term outlook is favorable, with some potential for consolidation over time.

The analyst said SanDisk plans to pave the way for more disciplined pricing in a capex-heavy industry with historically low returns.

In the longer term, if pricing trends improve structurally for the industry, there could be much higher valuation rerating potential. Still, Mohan was wary of normalizing such trends, especially given the pricing competition in China.

The analyst notes SanDisk’s joint venture with Kioxia allows the companies to share capex costs in an industry where such costs have surged as high as $30 billion in recent years.

Why It Matters: SanDisk’s operating margin has been more resilient in downturns due to the company’s management of capacity (not overextending production) and from its customer mix, he said.

Mohan noted that even as SanDisk expands its mix towards eSSDs, that end-market still represented only 15% of SanDisk’s sales in the second half of 2024.

The analyst expects SanDisk’s through-cycle operating profit to outperform other NAND Flash companies in future years.

Mohan projects fiscal 2025 revenue of $7.29 billion and EPS of $2.75.

SNDK Price Action: SanDisk stock is up 6.04% at $46.76 at publication on Wednesday.

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