Sandisk Stock Fell Back Under $900 on Friday. I'd Start With a Small Position.

Sandisk's stock price dropped back under $900 per share on Friday after reaching around $978 on Wednesday. The flash memory company had initially targeted that price for a potential purchase, based on its projected earnings. However, the stock has since fallen about 12% since then. This decline appears to be part of a broader market sell-off affecting tech stocks, rather than a reaction to Sandisk's company-specific developments.

For the current fiscal quarter, Sandisk expects revenue between $12.2 billion and $12.6 billion, with non-GAAP earnings per share ranging from $55 to $57. These projections represent a significant increase from previous years, with revenue up 378% year-over-year and adjusted earnings per share nearly nine times higher. The stock's valuation has also decreased substantially since the earnings guidance was announced, falling about 26% since October 30 when it closed near $1,151, or about 5 times annualized earnings.

While the biggest risk to Sandisk's profitability is potential reductions in flash memory prices, which have driven most of its earnings growth, the company's guidance suggests demand for its products is expected to remain strong through 2027. Sandisk's current price implies a purchase of about 3.8 years of earnings at the midpoint of the guidance, suggesting potential upside if profits continue at this level.

Given these factors, the reporter recommends considering a small position in Sandisk stock at the current price, with the option to add to the position if it continues to decline.