Sandisk's Pullback Looks Like a Buying Opportunity

Do memory stocks have a problem? Despite reporting massive revenue growth and rising profits, many memory stocks are on a downswing. Sandisk (SNDK) was the most recent victim, as the stock fell more than 6% following impressive fiscal fourth-quarter results that included a 103% sequential increase in data-center revenue.

The pullback was even more remarkable in that Sandisk and Kioxia, a subsidiary of Kioxia Holdings (KXIAY), just announced the release of an improved QLC 3D flash memory technology. The companies say the 10th-generation product offers 60% higher bit density than the previous generation. Enhancements also improve power efficiency during data transfers and address power and cooling challenges in artificial intelligence-capable data centers and cloud infrastructure.

Considering how hungry the market is for memory products, one would think that the announcement of an improved product would help SNDK stock. But the decline continues, and Sandisk is off by 35% in the past one month. That’s a huge disappointment for investors in the company, which has been the best-performing component in the S&P 500 ($SPX) all year.

About Sandisk Stock

Based in Milpitas, California, Sandisk has become one of the best infrastructure stocks for the AI expansion. The company manufactures flash and advanced memory computer storage products used in phones, laptops, and smart devices. However, the data-center segment is what's really driving SNDK stock's growth. Importantly, Sandisk’s memory products are used in data centers to support the running of high-level AI programs.

Despite the most recent downturn, shares of SNDK stock are still up by more than 400% so far this year, and Sandisk is by far the best performer in the greater index.

Sandisk also has an exceptionally low forward price-to-earnings (P/E) ratio of 6.7 times, compared to the S&P 500’s forward P/E ratio closer to 21 times. The pullback has helped Sandisk's valuation on several metrics, with its forward P/E falling in the last month. The Relative Strength Index (RSI) is currently near 43, which is considered neutral. Less than two months ago, Sandisk’s RSI was at 99, leading Polymarket to call it “the most overbought stock in history.”

Sandisk Beats on Earnings

Sandisk did its part when it reported fiscal fourth-quarter earnings last week. Revenue came in at $8.97 billion, up 372% year-over-year (YOY) and 51% sequentially. Net income was $6.16 billion versus $42 million a year ago, while EPS of $39.25 beat analysts’ expectations for $33.28.

For full-year fiscal 2026, revenue was $20.25 billion, up 175% YOY. Net income came in at $10.98 billion, while EPS was $70.88.

The company’s data-center segment continued to put up big numbers with quarterly revenue of $2.98 billion, up 103% YOY. For the full year, data-center revenue was $5.15 billion, up 437% from fiscal 2025.

"We closed fiscal 2026 with a leading technology portfolio, established datacenter as a key growth pillar, and deepened our customer partnerships," said CEO David Goeckeler. "Our technology and products are well positioned to create value for our customers and generate growing and durable free cash flow."

Sandisk issued guidance for Q1 revenue in the range of $10.3 billion and $10.8 billion, with gross margins between 83% and 85%.

How Should You Play Sandisk Stock Now?

The challenge for Sandisk isn’t its business at all. It’s the shortage of memory — something that should be a tailwind, not a headwind. On the one hand, Sandisk and other memory firms like Micron and SK Hynix (SKHY) can raise prices virtually at will. Companies have already committed to building data centers and increasing their AI computing power, but all the silicon in the world won’t help if they don’t have memory chips.

On the other hand, there’s a lot of fear in the market right now that the AI buildout will turn into an AI bubble. If companies even temporarily scale back their plans because of rising memory prices or a shortfall in supply, chip companies will suffer. Elon Musk — the CEO of Tesla (TSLA) and SpaceX (SPCX), which are both investing a lot in AI — said that the demand for memory is increasing 200% a year while supply is only rising 20% per year. “The limiting factor currently is memory,” Musk said.

Analysts are still bullish on SNDK stock, with the 23 analysts who cover Sandisk giving it a consensus “Strong Buy” rating. The average price target of $2,245.40 represents potential upside of 82% from current levels. Considering the demand for memory products, Sandisk’s continued rollout of improved products, and lofty analyst sentiment, Sandisk looks like a great stock to buy on the dip.