Core Insights - The storage sector, particularly NAND flash, is experiencing a significant supply crunch driven by the generative AI revolution, leading to increased demand in data centers and edge computing [2] - Sandisk's stock saw a remarkable 12% increase in November, reflecting strong performance amidst a relatively flat S&P 500 [1] Company Performance - Sandisk reported a 23% year-over-year revenue increase in Q3, attributed to stabilized flash prices, although earnings per share declined by 33% due to startup costs related to new technology [3][4] - Adjusted earnings per share surged by 321% quarter-over-quarter, indicating strong operational momentum, with management forecasting revenue between $2.55 billion and $2.65 billion for the next quarter [4] Market Dynamics - The NAND flash market has faced oversupply issues for years, but recent cuts in supply from major manufacturers, combined with a rebound in PC demand and AI inferencing, have led to a surge in demand [6] - Memory and storage manufacturers are benefiting from fixed costs, allowing them to retain more profit as prices stabilize or rise [5] Valuation and Future Outlook - Analysts project Sandisk's earnings per share to reach $20.21 by fiscal 2027, suggesting a low price-to-earnings ratio of 10.2, which may attract tech investors [7] - However, the NAND flash industry is characterized by boom-and-bust cycles, with earnings estimates for 2027 showing a wide range of uncertainty [8][9] - For continued investment, there is a need for confidence in sustained AI demand and disciplined supply growth, as historical trends indicate challenges in managing supply effectively [9]
Why Sandisk Rallied in November