Sandisk shares staged a strong recovery on Friday, climbing 11.7% to $1,497 in midday trading, after a steep decline the previous day triggered by concerns over near-term NAND demand. The stock hit an intraday high of $1,528, bouncing back from Thursday's close of $1,339.96. The rebound was fueled by a familiar narrative: AI memory supply remains constrained, and the company's latest guidance continues to significantly outperform last year's figures.
Earnings and Contracts Drive Optimism
Sandisk reported third-quarter revenue of $5.95 billion, a 251% year-over-year surge, with adjusted earnings of $23.41 per share. The data-center segment jumped 233% sequentially, underscoring the company's pivot toward higher-value markets. CEO David Goeckeler called the quarter a "fundamental inflection point," highlighting new multi-year customer agreements designed to bring stability to the volatile memory sector.
These contracts are central to the rally. CFO Luis Visoso revealed that Sandisk secured three deals in the third quarter and two more in the fourth, with the three agreements alone guaranteeing nearly $42 billion in minimum contractual revenue. The five deals collectively carry over $11 billion in financial guarantees, providing a solid revenue backlog. As of April 3, the company reported $41.6 billion in remaining performance obligations, with about 15% expected to be recognized as revenue within the next year.
Market Context and Sector Strength
The Sandisk story is part of a broader AI-driven supply squeeze in the memory sector. On Friday, Micron surged 11%, capping a 32% weekly gain, while Sandisk rose 12% on the day and 26% for the week. Component shortages and AI demand have been key catalysts, though volatility remains a factor. Short interest increased to 9.75 million shares from 8.06 million, and investors have been locking in gains after a massive 412% rally since the start of the year.
Despite the optimism, caution persists. A Bernstein note warned about volatility in the spot market, though the firm maintained its buy rating with a $1,700 price target. Additionally, Sandisk's 10-Q filing highlighted risks associated with long-term supply deals, including execution challenges and the possibility that buyers may not fulfill orders, with financial guarantees potentially insufficient to cover losses.
Investors are viewing Thursday's dip as a temporary pause rather than a turning point. Attention now shifts to Sandisk's ability to leverage tight supply, higher NAND prices, and its AI-linked contracts into sustainable cash flow, while maintaining the pricing strength that initially drove shares higher.
