SanDisk Stock Drops Ahead of Split as Wall Street Analysts Weigh In

SanDisk (NASDAQ:SNDK) stock has been in a freefall and has reached its lowest level since April 9. It has slumped by 65% from its highest point this year, with its market capitalization falling from a record high of $347 billion to $118 billion. Still, while analysts have slashed their targets, they remain optimistic about the company. 

SanDisk Stock Split is Coming Up

SNDK stock has been in a strong sell-off in the past few months, mirroring the performance of other companies in the memory industry. Indeed, the Roundhill Memory ETF that tracks the biggest companies in the industry has slumped by over 51% from its all-time high.

SanDisk stock will be in the spotlight as it implements an eight-for-one stock split aimed at making it more accessible to investors and employees. November 9 will be crucial as it will see all investors receive seven additional shares for each share held. After that, trading is expected to begin on a post-split adjusted basis on November 20.

Wall Street analysts have pared back their targets for SanDisk as memory stocks have tumbled. Wells Fargo reduced the target from $1,550 to $1,300, while Royal Bank of Canada slashed from $1,600 to $1,400. Susquehanna’s Mehdi Hosseini slashed the target from $2,747 to $2,720.

Despite these moves, the average target for SanDisk among analysts is $2,056, up by 146% from the current level.

SanDisk recently published strong financial results, which showed that its revenue jumped to $11 billion in the third quarter as demand for its products increased. Its net income jumped to over $8 billion, and the management expects the trend to continue. The fourth-quarter revenue is expected to come in between $12.2 billion and $12.6 billion, with its gross margin being between 84.4% and 85.4%.

SanDisk Has Become Highly Undervalued

Meanwhile, there are signs that SanDisk has become a highly undervalued company. Its forward price-to-earnings ratio stands at 3.67, much lower than the technology sector average of 19.16. The figure is also much lower than the S&P 500 Index’s average of 19.

Similarly, the forward price-to-earnings-to-growth ratio stands at 0.09, which is also lower than the sector median of 1.01. The cheap valuation also coincides with that of other companies in the memory industry, such as Micron and Western Digital. 

These trends are because of the rising concerns about the artificial intelligence (AI) bubble. Some analysts believe that the AI industry will start slowing down in the coming months, especially after the Democrats won the midterm elections by a landslide.

There are also concerns that the industry will face substantial oversupply in the coming years. SanDisk has moved to guard against a sharp downturn by entering long-term deals that set both floor and ceiling prices.

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