TLDR
- SNDK stock jumped 11.9% after news it will join the S&P 100 on September 21
- SanDisk has 10 long-term supply agreements with eight customers, covering more than half of its flash memory shipments in fiscal 2027
- The contracts carry a minimum revenue floor of $93.9 billion across their lifetimes
- Customers have put up $16.5 billion in financial guarantees in case they walk away
- SNDK is up 633% year-to-date and trades at around 8x expected fiscal 2027 earnings
SanDisk stock surged 11.9% on Friday, September 5, pushing the price to $1,740. The catalyst was news that SNDK will be added to the S&P 100 before the market opens on September 21.
The stock is up 633% year-to-date, riding the AI infrastructure boom. Despite that run, SNDK still sits more than 25% below its 52-week high of $2,354.39. The 52-week low is $67.86.
At current prices, the stock trades at roughly 8 times expected fiscal 2027 earnings. That valuation suggests the market is pricing in a meaningful drop in earnings going forward.
SanDisk posted $6.9 billion in net income last quarter, driven by a sharp rise in memory prices. Revenue for fiscal 2026 came in at $20.25 billion, up 175% year over year.
Long-Term Supply Contracts Limit Downside
To protect against the next memory downturn, SanDisk has locked in 10 long-term supply agreements with eight data center and edge customers. These are what the company calls its New Business Model agreements.
The contracts commit customers to buy set volumes of flash memory over a weighted average of more than four years, and up to five. Pricing has fixed and variable components, with the variable portion subject to price floors and ceilings.
At floor pricing across all agreements, SanDisk is guaranteed at least $93.9 billion in revenue over the life of the contracts. That is not an annual number, but it is a meaningful backstop for a company that did $20.25 billion in revenue last year.
Customers have also put up $16.5 billion in cash deposits and other financial instruments as guarantees. If a buyer walks away, SanDisk has recourse.
Coverage Is Growing
Management expects these contracts to cover more than half of total bits shipped in fiscal 2027, which started in July. By fiscal 2028, that figure is expected to reach about two-thirds.
The contracted backlog is also growing fast. Remaining performance obligations rose from $41.6 billion in early April to $59.8 billion by July 3. Two deals signed after the fiscal year closed add another $31.3 billion not yet included in that figure.
CFO Luis Visoso said the company expects “attractive margins even at floor pricing.”
Still, the floors are not a full guarantee. About half of this year’s volumes still sell at spot market prices. And the multi-year model presented at August’s investor day projects adjusted gross margins near 80% for fiscal 2028 through 2030, down from the 84.6% posted last quarter.
Guidance for fiscal Q1 2027 calls for revenue of $10.3 billion to $10.8 billion, with non-GAAP gross margin between 83% and 85%.
On TipRanks, SNDK holds a Strong Buy consensus from 14 analysts, with two Hold ratings. The average price target is $2,201.56, implying about 27% upside from current levels.
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