Sandisk sits 32% below peak after 35-fold surge; history split

Sandisk shares have climbed more than 35-fold from a 52-week low of $43.20 yet still trade about 32% below the June 22 peak of $2,354.39.

"The honest answer is that history is split," Daniel Sparks, a contributing analyst at The Motley Fool, said. "The stocks that got back to their peaks were the ones whose earnings kept growing through the drawdown."

The drawdown has been violent. From the June 22 peak, shares fell below $1,000 in intraday trading on July 29, a drop of about 58% in five weeks, before an Aug. 13 investor day sent the stock up 14% in a single session. Gross margin reached 84.6% in the fiscal fourth quarter ended July 3, expanding from 26.2% a year earlier, on revenue of $8.97 billion, up 372% from the year-ago quarter. Management said about two-thirds of the quarter's sequential revenue growth came from higher pricing.

Today's price works out to about 22 times what Sandisk earned in fiscal 2026 and less than 8 times what analysts expect for fiscal 2027. The company guided for fiscal first-quarter revenue of $10.3 billion to $10.8 billion, up from $8.97 billion, with gross margin holding in the 83% to 85% range. Whether the stock recovers its peak likely hinges on the next few quarters of memory pricing.

The ones that stayed down

GameStop is the harshest case. The stock spiked about 20-fold inside a few months in early 2021, gave back most of it, and never returned; in the five years since, no yearly high has come within 40% of that peak.

Micron deserves the most attention because it looked cheap the whole way down. The memory specialist rose about sixfold from its 2016 low to its 2018 peak, where shares traded at just over 5 times the $11.51 per share it earned in fiscal 2018. The low multiple did not help. Revenue fell 23% to $23.41 billion in fiscal 2019, net income dropped from $14.14 billion to $6.31 billion, and the stock spent about two and a half years below its 2018 high.

The ones that came back

Nvidia lived through the same shape in 2018. The chipmaker had risen about 15-fold from its 2015 low by the time the stock peaked that October, then lost more than half its value by year-end. Revenue fell 7% in fiscal 2020, but Nvidia returned to growth and climbed past its old high in 2020 — and kept going.

Tesla is the fastest recovery in the set. After the stock rose more than eightfold in 2020, a sell-off took it down 36% from its late-January peak by early March 2021. Deliveries nearly doubled that year, and by late October Tesla was back at record highs.

Which group is Sandisk in?

The two groups did not split on how big the run had been or how hard the first leg down hit. They split on what earnings did next. Micron's profits collapsed within a year of its peak, and GameStop barely had profits to lose. Nvidia's and Tesla's kept growing, and both stocks eventually made the drawdown look like a pause.

That is what makes Sandisk's current valuation striking. A multiple of less than 8 times forward earnings is the market saying it does not believe the estimates — a reading that points to a year more like Micron's fiscal 2019 than the forecasts. The company's own guidance points the other way, with revenue still set to climb and gross margin holding in the 83% to 85% range.

A 32% gap to the old high predicted nothing on its own in any of these cases. The stocks that got back to their peaks were the ones whose earnings kept growing through the drawdown, or dipped once and recovered; the ones that never recovered saw earnings roll over. Sandisk's slide should be judged the same way. The chart will not settle it. The next few quarters of memory pricing likely will.

This article is for informational purposes only and does not constitute investment advice.