Sandisk (SNDK) Stock Recovers 1.5% After Western Digital’s…

Sandisk (SNDK) stock rose 1.54% to $1,280.30 by midday Friday, recovering part of Thursday’s 8.51% fall, six days before Sandisk reports its own quarter. The slide came on a session when its former parent beat on every line and raised guidance.

Western Digital reported fiscal first quarter revenue of $4.38 billion and non-GAAP earnings of $4.64 a share on Thursday evening, then guided the current quarter to $5.1 billion and $5.80. Memory stocks fell anyway, and the question for anyone holding SNDK stock into 29 October is why.

Western Digital Beat by $0.53 and Guided $1.16 Above the Quarter It Just Printed

Revenue of $4.381 billion rose 55% year over year and 17% sequentially, according to the company’s release, against a consensus near $4.14 billion. Non-GAAP earnings of $4.64 came in $0.53 above the $4.11 the street carried and were up 161% on the year, while GAAP diluted earnings reached $4.63 on net income of $1.78 billion.

The guidance was the larger number and the one that should matter to Sandisk holders. Western Digital told investors to expect $5.1 billion of revenue, give or take $100 million, and $5.80 of diluted earnings per share, give or take $0.20. That is $1.16 above the quarter it had just reported and roughly 16% more revenue in a single step. Non-GAAP gross margin reached 58.1% and operating margin 49.1%, against the 55% to 56% gross margin the company had guided to. That combination is what makes Thursday’s move in SNDK stock hard to read off the fundamentals.

Memory Sold Off Anyway and the ETF Fell Harder Than the Nasdaq

Thursday’s damage was concentrated in a narrow corner of the chip and storage complex. Sandisk fell about 8% to $1,262.01, Western Digital about 7% to $351.77 and Micron about 6% to $860.97, per 24/7 Wall St. The Roundhill Memory ETF dropped 7% while the Invesco QQQ Trust fell 2.77%.

That gap between the memory fund and the index is the story of Thursday’s session. A sector fund falling two and a half times as hard as the Nasdaq points at something specific to memory rather than a broad risk-off move, and SNDK stock was the worst of the three. Most of the selling happened before Western Digital’s numbers were public.

Investor Takeaway

This Is the Second Time in Three Months That a Beat Has Been Sold

August produced exactly the same sequence, which is why it is worth revisiting now. Both companies forecast quarterly revenue above LSEG estimates, and both fell hard the next day, with Sandisk down 13.3% to $1,178 and Western Digital down 19.1% to $420. Reuters reported that the forecasts beat the compiled estimates while falling short of market expectations, which is the gap that matters when a stock has run this far.

Wells Fargo put the reason plainly at the time, pointing to slowing upside revisions driven by tapering price growth. FinanceFeeds covered that August reaction and set the bar for Thursday’s print in yesterday’s preview. Two quarters of the same pattern suggests the buy side is carrying numbers well above the published consensus, which is the real bar on 29 October rather than the printed estimate.

Sandisk Makes NAND and the China Fear Is About DRAM

The specific driver of the memory selloff, and the fear now attached to SNDK stock, is competition from Chinese manufacturers, with CXMT’s progress on denser DRAM the trigger that started it earlier in October. Sandisk makes NAND flash rather than DRAM, which makes the exposure indirect, and the same distinction applied to the Micron strike in Taiwan this week.

Mizuho reiterated an Outperform rating on Sandisk on Thursday, arguing that flash pricing should hold because capacity outside China is expected to stay largely unchanged. That note did not stop Sandisk leading the group lower, which is a reasonable measure of how little single-name research counts when a sector unwinds. FinanceFeeds has tracked the pricing argument through Citi’s $2,100 target and the scenario ranges on Micron and Western Digital.

What SNDK Stock Carries Into 29 October

Sandisk reports fiscal first quarter results on 29 October after the close. SNDK stock arrives there 28.25% below where it sat a month ago and 18.71% lower over three months, while still up 416.03% for the year and 745.69% over twelve months, on a market value of $182.24 billion.

The valuation is not the obstacle here on any conventional measure of earnings. SNDK stock trades at 18.91 times trailing earnings of $77.61 a share, which is modest for the growth it has posted, and the published bull and bear scenarios run to $2,481.99 and $681.22. With a beta of 3.51 and both the analyst rating and the technical read sitting neutral, the print will move it further than the headline numbers alone would suggest.

Investor Takeaway