$SNDK

Summary

The analyst upgrades SanDisk to Buy with a new price target of $1,277, expecting strong FY3Q26 results and guidance driven by rising NAND prices and demand growth, especially from consumer electronics and AI workloads.

Reasoning

NAND ASP rising significantly, tight supply-demand balance, strong revenue and operating margin forecasts, accelerating KV cache demand, cost advantages over DRAM, and attractive valuation compared to Micron.

【GF Overseas Electronics & Communications】 SanDisk FY3Q26 Preview: NAND Is in a Better Position ☄️ SanDisk FY3Q26 Preview: NAND Is in a Better Position ☀️ Upgrade to Buy, new PT of $1,277: SNDK reports FY3Q26 on April 30. Combined with the recent contract price trajectory, we expect both results and guidance to come in strong. NAND ASP rose in the 70% range in FY1Q26, and is accelerating further to +90–100% in FY2Q26. The biggest upside surprise this cycle is coming from consumer electronics: despite volume cuts from domestic Chinese Android OEMs, the supply-demand balance remains tight, pushing smartphone makers to accept price hikes to $0.25/GB — versus just $0.12/GB in FY1Q26. In eSSD, the current negotiation range is $0.35–0.37/GB, driving blended ASP up ~90% QoQ. On this basis, we forecast FY3Q revenue of $4.9B at 71.5% OPM, and guidance for FY4Q26 revenue north of $10B with OPM above 84%. Another important catalyst is the step-up in contract liabilities, reflecting LTA prepayments flowing through. We forecast FY2027 EPS of $286.52, and apply 4x FY2027E P/B to derive our $1,277 price target. ☀️ KV cache demand growth accelerates into 2027: SNDK has indicated that KV cache will generate 100EB of incremental NAND demand in 2027, with demand potentially doubling in 2028. However, given the recent surge in token demand, OpenRouter traffic up 17x, and accelerating AI agent adoption, we view this forecast as conservative. 100EB already equates to ~7% of total 2027 NAND demand, and even accounting for improvements in compression rates, demand still looks set to grow exponentially. On the supply side, NAND capacity additions remain measured: SK Hynix's core focus is on technology migration, while new capacity is concentrated in SNDK/Kioxia's K2 fab, Samsung's P5 line (coming online in 2028), and YMTC. ☀️ Cost optimization may reshape the NAND vs. DRAM competitive landscape: We expect the memory market to approach $1 trillion in size by 2027, with CSPs accounting for 40–45% of total demand and memory spend representing over 40% of CSP CAPEX. On this basis, we believe the cost advantage will progressively tilt the revenue mix toward NAND (server DRAM is priced at ~$2.2/Gb, vs. eSSD at just $0.35–0.37/GB). Tiered storage architecture is the core structural driver of rising NAND share in AI workloads, and the arrival of HBF from 2028 onward should further amplify this. On valuation, Micron currently trades at 4.3x FY2027E P/E versus SNDK at just 3.4x — on both multiple and long-term positioning, SNDK offers more compelling allocation value. $SNDK

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