Sandisk Stock Has Collapsed by 65%, but It's Still Undergoing an 8-for-1 Stock Split on Nov. 19. Here's Why I'm Still Not Buying Shares Amidst This Nasdaq Market Slump.
Key PointsSandisk stock has ridden massive gains in the AI boom, but the stock is now down sharply from its peak.
The memory and storage company Sandisk has seen its stock price plummet by 65% recently. This decline comes as the Nasdaq Composite index entered a correction phase, dropping over 10% from its peak. Sandisk's stock had experienced a dramatic surge, up more than 6,000% since its separation from Western Digital, but is now down more than 50% from that high.
The company has scheduled a stock split for November 19, but despite the price dip, it may still be an expensive investment option. Sandisk's revenue has surged to $11 billion, up 378% year-over-year, with a gross margin of 85%, a significant improvement from the low 30% margin in the same period a year ago. However, the rapid growth in the AI infrastructure sector has led to a worldwide memory chip shortage, allowing Sandisk and its peers to raise prices.
This boom in earnings has been a major driver of Sandisk's stock price. However, recent developments such as OpenAI's delayed IPO, CoreWeave's difficulty raising funds, and potential AI regulation changes due to midterm elections have raised concerns among investors. Sandisk's guidance for fiscal Q2 of 2027 suggests a 10% sequential revenue growth, but this is slower than the 23% growth seen in the previous quarter.
Wall Street's preference for consistent revenue growth has negatively impacted Sandisk's stock price. While Sandisk's gross margins have improved significantly, the company's ability to implement price increases across its product lines could lead to a supply-demand imbalance in the memory chip market. Historically, this imbalance has resulted in market corrections, which could harm Sandisk's earnings.
The upcoming stock split is merely a cosmetic change and does not alter the company's valuation or business fundamentals. With a forward P/E ratio of 3.5, Sandisk appears cheap in the short term, but a prolonged downturn in the memory chip market could significantly impact its earnings, potentially making the stock extremely expensive in the long run.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
