Hua Er Jie Jian Wen·2025-12-10 10:04Core Viewpoint - Morgan Stanley assigns a "Neutral" rating to SanDisk with a target price of $235, indicating that while the company is experiencing peak profits driven by AI demand and joint venture cost advantages, this reflects cyclical industry conditions rather than structural improvements [1] Group 1: Market Position and Growth - SanDisk holds a relatively weak position in the rapidly growing enterprise SSD market, with a global market share of only 2-3%, significantly lower than its approximately 15% share in the overall NAND flash market [3] - The enterprise SSD market is expected to grow at a compound annual growth rate (CAGR) of 35%, reaching around $45 billion by 2027 [3] - Despite benefiting from engagements with major cloud service providers, SanDisk is still seen as a follower in the high-performance PCIe 5.0 enterprise SSD segment compared to competitors like Samsung and SK Hynix [6] Group 2: Competitive Advantages and Risks - SanDisk's joint venture with Kioxia, Flash Ventures, is considered a core competitive advantage, allowing the company to achieve 50% wafer output at equal costs, thus lowering capital intensity and improving return on investment [10] - However, this joint venture also means that SanDisk is heavily reliant on Kioxia's health and strategic direction, limiting its independent decision-making in capacity expansion and technology development [10] Group 3: Cyclical Nature of the Industry - The NAND industry is characterized by significant cyclical features, with current supply tightness and high prices being an extension of the cycle rather than a structural reversal [11] - It is anticipated that major suppliers will restart large-scale capacity construction plans around 2027, which could lead to an increase in storage capacity growth outpacing market demand growth [12] - The growth rate of traditional end-market demand is slowing, with smartphone storage capacity expected to grow at a CAGR of only 10% from 2025 to 2027, compared to 23% over the past decade [12] Group 4: Financial Projections - SanDisk is projected to achieve revenue growth of 18% and 38% in 2025 and 2026, respectively, surpassing the overall NAND market growth rates of 2% and 27% [16] - This growth is expected to increase SanDisk's market share to approximately 16% by the end of 2026, a rise of about 300 basis points from the current 13% [16] - However, these strong financial performances are primarily reflective of cyclical peaks rather than structural improvements in profitability, suggesting that investors should evaluate the company's value based on complete cycles [16]