Raymond James upgrades Sandisk on tightening NAND supply

Investing.com -- Raymond James upgraded Sandisk to Outperform from Market Perform and with a $725 price target, saying the company remains positioned for further upside despite shares rising more than sixteenfold since its spin-off from Western Digital a year ago.

The current data center and AI-driven storage cycle is distorting traditional forecasting, with Sandisk guiding to revenue upside of about 57% versus consensus and earnings more than double expectations.




Demand remains exceptionally strong and continues to build, while supply is tightening to the point that capacity could be effectively sold out for years, with little new supply expected in the near term.

This environment supports sustained pricing strength and marks a shift toward a more favorable outlook for NAND, not just DRAM.

Sandisk is a key beneficiary of longer-lived data center builds, with supply increasingly prioritized away from faster-turn consumer and edge markets.

In its quarterly results the company posted data center revenue jump 64% quarter on quarter and now accounting for about 15% of total sales.

Management expects growth to accelerate further as additional hyperscale and data center customers are qualified. Pricing was described as exceptionally strong, with contract prices changing materially within short timeframes, a trend management expects to continue into the March quarter.

Bit supply grew at a low single-digit pace in the quarter, but the transition to BiCS8 is expected to lift bit growth into the low- to mid-teens within existing capital spending plans. While cost reductions were limited to about 10% last quarter, Raymond James said management expects improvement ahead, even as higher-cost products often carry higher average selling prices.

RJ now expects earnings of $41.06, for fiscal 2026. It driven by continued data center momentum and margins nearly double year-ago levels.

The $725 target is based on an 8.4x multiple of projected fiscal 2027 non-GAAP earnings, in line with the current forward multiple.

Raymond James said further earnings revisions are likely as investors gain clarity on supply and pricing dynamics in what it described as an unprecedented market environment.

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