Analyst: SanDisk Supply Shortage to Persist Through 2030

SanDisk shares fell about 10% on Friday amid a broad selloff in technology stocks, dragging down high-growth names. The Nasdaq Composite fell 2.85%, while the S&P 500 declined 1.41%.

Despite the share decline, SanDisk continues to benefit from stronger data center demand, higher pricing, and improving long-term revenue visibility as artificial intelligence drives storage demand.

Rosenblatt analyst Kevin Cassidy maintained a Buy rating and a $2,400 price target, based on 10 times his fiscal 2028 non-GAAP EPS estimate.

Data Center Demand Drives Growth

Cassidy said SanDisk's first fiscal quarter results beat expectations, with revenue surging 378% year-over-year and rising 23% sequentially to $11.03 billion. Revenue exceeded his $10.55 billion estimate and the $10.72 billion consensus estimate.

Adjusted EPS came in at $49.51, beating Cassidy's $45.80 estimate and the $46.67 consensus estimate.

Data center revenue surged 1,682% year-over-year and rose 61% sequentially to $4.8 billion, serving as the primary growth driver.

SanDisk also reported an 85.1% non-GAAP gross margin and $5.7 billion in adjusted free cash flow.

Long-Term Contracts Enhance Revenue Visibility

Cassidy said SanDisk's new business model agreements are performing better than expected.

The company has reached agreements with eight customers, covering approximately 50% of bit production for fiscal 2027 and about two-thirds of production for fiscal 2028. These contracts represent $93.9 billion in minimum committed revenue.

Cassidy said SanDisk's pipeline of potential new business model agreements has exceeded its available supply through the end of the decade, indicating sustained strong demand for its storage products.

He added that 95% of existing agreements are with investment-grade customers, enhancing confidence in long-term revenue visibility.

Cassidy said demand from potential agreements exceeds available supply through the end of the decade. He expects contract coverage to improve as SanDisk signs new customers and extends existing agreements.

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AI Creates New Storage Opportunities

Cassidy views AI inference as another significant growth opportunity.

He expects data center demand for NAND flash to expand with the growing adoption of triple-level cell and quad-level cell enterprise SSDs, as well as the application of key-value cache tiering technology.

SanDisk expects KV cache to account for approximately one-third of the AI data center flash memory market by the end of the decade.

Cassidy also highlighted the company's BiCS technology roadmap and emerging high-bandwidth flash technology, with initial HBF samples expected in 2027.

Analyst Raises Earnings Estimates

Cassidy raised his second fiscal quarter revenue estimate from $12.2 billion to $12.4 billion, and his adjusted EPS estimate from $52.98 to $56.90.

For fiscal 2027, he raised his revenue estimate from $48.8 billion to $49.48 billion, and his adjusted EPS estimate from $210 to $221.28.

For fiscal 2028, Cassidy maintained his $60 billion revenue estimate but raised his adjusted EPS estimate from $240 to $247.71.

SanDisk expects second fiscal quarter revenue between $12.2 billion and $12.6 billion, with adjusted EPS between $55 and $57, exceeding Cassidy's prior estimates.

Cassidy also said SanDisk expects data center NAND bit demand to grow approximately 40% in 2027. However, the company plans to maintain bit production growth at a disciplined mid-to-high single-digit percentage level, rather than aggressively expanding capacity.

SNDK Price Action: SanDisk shares were down 10.21% at $1,194.29 as of Friday's writing.