SanDisk (NASDAQ:SNDK) experienced a sharp decline over the past five trading sessions, with shares closing Friday at $1,354.82, representing a 29.3% drop. This sell-off erased approximately $88 billion in market value, based on the company's outstanding share count.
The stock now sits 42% below its June 25 closing peak, though it remains up 471% for the year. The dramatic pullback has shifted market focus from valuation compression to the sustainability of earnings growth.
According to data from LSEG, SanDisk's forward price-to-earnings multiple has contracted to 6.4 times, down from 13.6 earlier. However, this apparent bargain masks a significant earnings hurdle: at the current price and multiple, the market is pricing in roughly $212 in forward earnings per share. That figure is 68% above a simple annualization of SanDisk's fourth-quarter guidance midpoint of $31.50 per share.
The sell-off was broad but particularly severe for SanDisk compared to peers. Over the same period, Western Digital (NASDAQ:WDC) fell 18.1%, Micron Technology (NASDAQ:MU) dropped 13.3%, and the PHLX Semiconductor Index (SOX) declined 10.0%. SanDisk underperformed the chip index by 19.3 percentage points.
Recent operating results highlight the high expectations. Fiscal third-quarter revenue surged 97% sequentially to $5.95 billion, with datacenter revenue jumping 233% to $1.47 billion. Gross margin reached 78.4%. For the fourth quarter, SanDisk guided revenue between $7.75 billion and $8.25 billion, non-GAAP earnings of $30-$33 per share, and margins of 79%-81%.
CEO David Goeckeler described the quarter as a “fundamental inflection point,” citing customer commitments leading to “structurally higher and more durable earnings power.” The company reported $41.6 billion in remaining performance obligations, primarily from long-term agreements.
Despite these fundamentals, the market treated memory as cyclical last week. Toni Meadows, investment head at BRI Wealth Management, noted that valuations had priced in “near-perfect demand,” linking the reversal to profit-taking and scrutiny of AI spending durability.
Looking ahead, next week brings earnings reports from key customers and chipmakers. Alphabet (NASDAQ:GOOGL) reports on Wednesday, while Intel (NASDAQ:INTC) reports later. Their commentary on spending and demand could significantly influence semiconductor sentiment. SanDisk itself has no scheduled investor event until its fourth-quarter results on August 5, followed by an investor day on August 13.
Key risks include customer concentration, as SanDisk's top 10 customers accounted for 46% of recent quarterly revenue. Falling NAND prices, weaker AI spending, or new supply could quickly pressure margins.
The central question for investors is no longer whether the multiple is low, but whether earnings can approach the roughly $212 level implied by the current valuation. That gap will likely define trading until the August results.
