Key Takeaways
- Mark Newman from Bernstein raised his SanDisk price target from $1,700 to $3,000, marking the highest target on Wall Street.
- The price target increase follows SNDK’s approximately 12% decline over two sessions amid concerns about AI infrastructure spending linked to OpenAI financing news.
- Newman highlights that updated long-term supply contracts provide SanDisk with significantly better downside protection compared to traditional industry agreements.
- The firm increased its fiscal 2027 and 2028 EPS projections to $243 and $272 respectively in the base-case scenario.
- While SNDK maintains a Strong Buy consensus rating, the average analyst target remains below the current trading price.
Shares of SanDisk (SNDK) experienced significant volatility this week. The stock plunged approximately 12% across two consecutive trading days following news that OpenAI is exploring additional financing arrangements to fund upcoming artificial intelligence infrastructure initiatives. This development triggered widespread concern among semiconductor investors, creating ripple effects throughout the sector that impacted SanDisk.
Yet Bernstein’s Mark Newman remains undeterred by the recent decline. The analyst just upgraded his price target on SanDisk from $1,700 to $3,000, positioning it as one of the most aggressive forecasts currently on Wall Street. Newman maintained his Outperform rating on the stock.
According to TipRanks metrics, Newman ranks in the top 1% of all Wall Street analysts. His thesis: the market continues to underappreciate the fundamental transformation occurring within the memory chip industry.
Newman’s Case for Continued Growth
The foundation of Newman’s bullish stance rests on evolving long-term supply contracts. Traditional agreements in the memory sector historically favored buyers during price downturns. The current generation of contracts presents a markedly different structure.
Modern supply agreements feature fixed or range-based pricing mechanisms, substantial upfront financial obligations, and extended contract durations spanning three to five years. Newman contends this framework substantially reduces downside exposure, though it doesn’t eliminate the cyclical characteristics inherent to the memory business.
Newman also challenged a widespread misinterpretation of these contractual arrangements. A significant portion of Wall Street views the upfront financial commitments as static protective measures. Newman’s analysis suggests their protective capability actually strengthens over time, as the outstanding delivery requirements decrease while the upfront commitment amount remains constant.
“We believe this is not understood by the Street,” Newman explained, emphasizing that the structure provides enhanced protection in later stages, “when it is more likely to be needed.”
Drawing from SanDisk’s latest contractual arrangements, Newman calculates a price floor of approximately $0.29 per gigabyte. This figure aligns closely with his current projection for the company’s average selling price.
Newman acknowledged limitations in his thesis. These extended supply agreements “do not completely remove risk of future downcycles,” though they “do significantly alleviate downside risk.” His analysis suggests that even during a severe price deterioration exceeding historical industry downturns, roughly 60% of anticipated volumes would remain protected under long-term agreement coverage.
Updated Financial Projections
Newman adjusted his earnings estimates upward to align with his strengthened conviction. His base-case scenario now anticipates fiscal 2027 earnings per share of $243 and fiscal 2028 earnings per share of $272.
His optimistic scenario projects even higher figures, targeting $350 for fiscal 2027 and $400 for fiscal 2028. These estimates reflect his belief that current pricing dynamics will persist longer than consensus expectations suggest.
Newman contends the market hasn’t adequately valued the implications of these structural changes for SanDisk. “Lower volatility and higher sustainability of earnings are worth a higher PE,” Newman stated, emphasizing that reduced earnings downside risk “is not being factored into current multiples.”
Broader Wall Street sentiment leans bullish, though with more moderation than Newman’s view. SNDK carries a Strong Buy consensus derived from 14 Buy ratings and 2 Hold ratings.
The consensus 12-month price target among analysts stands at $1,954.38. This figure trails the current share price by roughly 5%, indicating many analysts haven’t adjusted their models to reflect SanDisk’s extraordinary performance this year.
Year-to-date, SanDisk shares have surged 764%. Newman’s $3,000 target now represents one of the most optimistic projections in analyst coverage.
