Some AI stocks have delivered enormous returns over the past year, but none quite to the extent of SanDisk (NASDAQ:SNDK). Spun off from Western Digital at the start of 2025, the shares have since gained more than 3,300%, massively benefiting from AI-boosted demand for its NAND flash storage solutions.
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Forget margin or options. Here's how the pros trade SNDKThe extraordinary rally has in no way been built on hype but on massive real-world growth. The recent FQ3 report featured a 252% year-over-year surge in revenue and a 97% sequential increase. Meanwhile, adjusted gross margin has now approached 79%, while management also raised its gross margin outlook for the next fiscal quarter, guiding to a midpoint of 80%.
Poring over the other key metrics, one top investor, who goes by the pseudonym JR Research, believes it is “increasingly clear that nothing is getting in the way of preventing SanDisk from achieving a record-breaking year for FY2026.”
Moreover, says JR, the company remains debt-free and now holds more than $3.7 billion in cash and equivalents. It continues to generate significant free cash flow, producing nearly $3 billion in FCF in FQ3 alone. For the full year, free cash flow is projected to approach $8 billion, implying a margin above 40%. If there were concerns that this year could represent a peak, next year’s FCF margin profile is expected to climb further, exceeding 46%.
“For a company that delivered negative FCF margins in FY2025, this is what I call a definitive flip against the erstwhile dominant narrative,” JR added.
But the key question facing both current and prospective investors is whether this is the “final rush to a sugar high.”
While long-term supply agreements offer some pricing visibility, they cover only about one-third of 2027 bit volume and do not fully protect against “future pricing volatility.” Additionally, investors must also consider whether SanDisk can realistically deliver materially higher gross margins beyond FY2027. After all, management is already discussing margins around 80%, leaving limited room for further expansion.
On the other hand, with the stock at less than 10x forward earnings, SanDisk is still trading well below the semiconductor sector median of 24x, suggesting the market has not become overly exuberant and that valuation may still provide some downside protection. “Yet,” JR added, “I do not think this is the time to throw caution to the wind.”
While the current momentum could continue, there is still uncertainty around how growth and margins will hold up beyond FY2027.
“Therefore,” JR summed up, “I think the right thing to do is to watch this unfold from the sidelines while keeping an open view on how SNDK could perform once this normalization narrative begins to proliferate later.”
To this end, JR, who’s ranked among the top 3% of stock pros on TipRanks, rates SNDK a Hold (i.e., Neutral). (To watch JR Research’s track record, click here)
Turning now to Wall Street’s view, where 3 analysts join JR on the sidelines, yet with an additional 13 Buys, the stock claims a Strong Buy consensus rating. However, the $1,409.06 average price target implies the shares are fully valued. With this in mind, watch out for some possible model revisions amongst the analyst community shortly. (See SNDK stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.