Sandisk (NASDAQ:SNDK) closed at around $1,395 on Oct. 15, its sixth straight daily decline. Over those six sessions, the flash memory maker’s stock shed around 18% of its value.
Yet shares are still up about 488% this year, measured from their $237 close at the end of 2025. But they’re also around 40% below the stock’s June 25 peak close of $2,335.
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Both numbers can make a would-be buyer pause. One suggests the big run already happened, and the other shows how fast the stock can drop.
I think the better comparison is to the business. Sandisk’s profits are still climbing, just far more slowly than they were in the stretch that brought most of this year’s gain.
Image source: The Motley Fool.
Slower profit growth
Sandisk first closed over $1,395 on May 5, under a week after it released its fiscal third-quarter results.
The business has delivered a lot since then.
Showing how fast its profits rose, Sandisk’s non-GAAP (adjusted) earnings per share jumped from $6.20 in fiscal Q2 2026 to $23.41 in fiscal Q3, a 278% sequential gain. Fiscal Q4 (the quarter ended July 3) landed at $39.25, up 68% sequentially and above the $30 to $33 management had guided for. For fiscal Q1 2027, which ended in early October, Sandisk guided for $44 to $46. The midpoint comes to around 15% growth over fiscal Q4.
Sandisk posts the results on Oct. 29. But the guidance already shows growth in earnings per share slowing from almost quadrupling in one quarter to a mid-teens rise.
Much of the slowdown comes down to pricing. Sandisk said around two-thirds of its sequential revenue growth in fiscal Q4 came from higher prices. For fiscal Q1, though, management expects growth from both more storage shipped and only modest price increases.
Its guidance also calls for an adjusted gross margin of 83% to 85%, about level with fiscal Q4’s 84.6%.
Is the stock cheap now?
Compared with what Sandisk earns today, the stock doesn’t look pricey. At around $1,395, Sandisk’s price-to-earnings ratio is about 19, using the $73.76 in GAAP earnings per share Sandisk reported for fiscal 2026. And the fiscal Q1 guidance alone, at the midpoint, is over 60% of the adjusted earnings per share Sandisk posted for all of fiscal 2026.
Plus, the company is putting its cash to work. In fiscal Q4, Sandisk produced around $5 billion in adjusted free cash flow and spent $4.5 billion to buy back about 2.8 million shares. Later, its board approved another $14 billion in buybacks, leaving $15.5 billion authorized as of early August.
But a low price-to-earnings ratio for a memory company can mislead. Memory prices go in cycles, and these stocks can look cheapest when profits are near their peak.
After all, Sandisk earned just $2.99 a share on an adjusted basis in fiscal 2025, which ended in June last year.
Half of the output is protected
Sandisk’s answer to that sort of swing is its New Business Model agreements, multiyear supply deals with eight customers. They carry at least $93.9 billion in revenue at floor prices, and management expects them to cover around half of the storage Sandisk sells in fiscal 2027 and about two-thirds in fiscal 2028. The deals also include $16.5 billion in financial guarantees meant to protect Sandisk if a customer doesn’t buy what it promised.
Management has said it expects attractive margins on the deals even at floor prices. That’s arguably protection Sandisk didn’t have in past downturns.
Of course, the rest of Sandisk’s output still sells at market prices. And investors were reminded this week of how fast memory stocks can turn, as the group sold off amid worries over funding for artificial intelligence (AI) projects and progress at a Chinese memory chipmaker.
Is it too late to buy Sandisk stock? Not in the way a 488% gain could suggest. The stock is back where it was in early May, and the business has since earned and guided for far more.
But most of this year’s gain came as earnings per share were multiplying from one quarter to the next. From here, the stock probably needs profits around today’s level to hold for years, and only about half of Sandisk’s output is under contracts built to support that. For a company that made less than $3 a share on an adjusted basis a fiscal year earlier, I think that’s a lot to bank on, even 40% off the peak.
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Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
