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Last week, I put a number on what I'd be willing to pay for Sandisk (NASDAQ:SNDK) stock. My rule was that I wouldn't pay over four years' worth of earnings at the rate management guided for this quarter, which came to around $900 a share.
The stock didn't stay under that price long. Sandisk closed at about $806 on Nov. 5. Then shares soared on Wednesday, Nov. 11 -- the day after AI cloud provider CoreWeave lifted its 2026 revenue forecast.
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At roughly $990 as of this writing, the flash memory company is up about 23% since that Nov. 5 close. Under my own rule, that means I'd hold off for now, and nothing else in the last week gives me a reason to bend it.
Sandisk's guidance for its fiscal second quarter of 2027, which is underway now, calls for non-GAAP (adjusted) earnings per share between $55 and $57 on a pre-split basis. The $56 midpoint comes to around $224 a share for a full year, and four years of that is where my $900 price came from.
At about $990, Sandisk trades at about 4.4 times those annualized guided earnings, so a buyer is paying for around 4.4 years of them rather than four. In other words, the stock is around 10% above my price.
The eight-for-one stock split doesn't change any of this.
Shareholders of record on Nov. 9 get seven more shares for every one they hold, issued after the close on Nov. 19. Trading on a split-adjusted basis should start the next morning, Nov. 20. After the split, my price works out to around $112 a share, while the current price comes to about $124.
Ten percent might not seem like much for a tech company whose stock has swung this hard. After all, Sandisk still trades around 58% under its late-June record close of $2,335.
But the point of setting a price beforehand is so a fast run-up doesn't talk me into paying more for the same earnings.
On paper, a price so low compared with earnings might make Sandisk look like a value stock. Still, I think four years is about as much as a memory maker's peak profits deserve. Sandisk's adjusted earnings per share hit $49.51 for its last quarter, up from $1.22 a year before. Profits that climbed that fast might drop fast, too, if flash prices turn.
Not that I can see. Sandisk hasn't updated its guidance since the Oct. 29 report, so the earnings behind my price are the same ones I used last week.
If anything, every new outlook has gone up by less than the one before. Management's fiscal Q4 2026 outlook called for adjusted profit of $30 to $33 per share, a $31.50 midpoint. The outlook for fiscal Q1 of 2027 (the quarter ended Oct. 2, 2026) lifted that midpoint around 43% to $45. And the current fiscal Q2 outlook raised it about 24% to $56.
In short, the boom is still adding profits, just at a slowing rate.
Of course, Sandisk has earned more than it guided recently. In fiscal Q4 of 2026, its adjusted earnings were $39.25 a share, beating the $30-to-$33 range, and fiscal Q1's $49.51 topped a range of $44 to $46. But the gap narrowed, from around 19% above the top of the range to about 8%.
My rule uses guidance on purpose -- so I'm not paying ahead of time for results that haven't happened yet.
The simplest one is the price. If the stock drops back below about $900 (or about $112 once split-adjusted trading starts) before I've bought, I'd look at it again as a buyer.
The other is a higher guided pace. When Sandisk reports its fiscal Q2 results, it will probably give an outlook for fiscal Q3. A midpoint near $62 a share would raise four years of guided earnings to about $990, close to where the stock trades as I write.
That would mean a step of about 11% from the latest midpoint, which is smaller than either of the past two, so it's arguably within reach.
But I'd rather see management give that number than assume it. Until one of those two things happens, I'm holding off. The company is still earning more every quarter. I just think a buyer at this price is paying for growth that Sandisk hasn't guided to yet.
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Sandisk Stock Is Back Above the $900 Price I Set for Buying It. Here's Why I'm Holding Off. was originally published by The Motley Fool
