Hook / Thesis
Sandisk just proved what the market suspected: storage is the bottleneck for the current AI build-out, and the company is positioned to monetize it faster than peers. After reporting Q2 fiscal 2026 results on 01/30/2026 that included revenue of $3.03 billion (up 81% year-over-year) and adjusted non-GAAP net income of $967 million ($6.20 per share), shares ripped higher. Management then guided Q3 revenue to $4.4-4.8 billion with $12-14 adjusted EPS - numbers that suggest this is not a one-quarter surge but a multi-quarter re-rating.
The trade is straightforward: buy a disciplined pullback into momentum. My actionable plan is to enter at $590.00, place a stop loss at $540.00, and run to a target of $760.00. This is a mid-term swing (45 trading days) designed to capture follow-through as AI datacenter demand translates into further revenue and margin beats.
Why the market should care - business and fundamental driver
Sandisk develops NAND flash-based storage devices - SSDs, memory cards and USB flash drives - with a clear tilt toward high-margin enterprise and datacenter products. The last quarter showed that the company’s product mix is shifting toward enterprise SSDs that sell at much higher ASPs, and management explicitly called out accelerating enterprise deployments. That matters because enterprise SSD demand feeds both revenue and gross-margin expansion; the company reported gross margins expanding north of 50% in the latest quarter according to coverage of the report.
Concrete metrics that back this up:
- Revenue - Q2 FY2026: $3.03 billion, +81% YoY.
- Adjusted net income - Q2 FY2026: $967 million, or $6.20 per share, well above consensus of $3.49 per share.
- Q3 guidance - revenue $4.4-4.8 billion, adjusted EPS $12-14; if realized, that implies another step-up in revenue and margins sequentially.
- Free cash flow - trailing metric in the dataset shows $1.449 billion, supporting an enterprise that is generating real, investible cash.
Valuation framing
On a headline basis the stock looks expensive. Snapshot market cap sits around $89.4 billion, price-to-sales is ~9.55, EV/EBITDA in the ratios reads 64.49x, and price-to-cash-flow sits at ~52x. The trailing GAAP EPS figure in one ratio block is negative, reflecting legacy accounting or cyclical noise (-7.03), but non-GAAP operating performance and the company's guidance show profitable, high-margin operations.
That valuation premium is only palatable if the company sustains very strong top-line growth and margin expansion over the next several quarters. Analysts quoted in coverage raised median targets (median target cited near $690) and some houses pushed targets as high as $800 after the print, which gives context for the $760 objective on this trade - it's within the new analyst band and allows for some momentum to run while keeping risk controlled.
Technical and market structure picture
Technically, Sandisk is in a powerful uptrend: the 10-day SMA is ~$514 and the 20-day SMA ~$441, while the stock traded as high as $676.69 on 01/30/2026 and is currently sitting above those short-term averages. Momentum indicators are hot- RSI sits around 86 indicating overbought conditions - so a measured entry on a pullback is preferable. Short interest is not prohibitive - days to cover commonly read as ~1 - so the squeeze risk is limited but not zero. Volume has expanded massively; two-week average daily volume is ~20.4M shares, indicating broad participation.
Catalysts (what will drive the trade)
- Continued beat-and-raise cadence - follow-through on Q3 guidance when the company reports sequential results and quarterly metrics.
- AI datacenter order flow - sustained enterprise SSD deployments from large cloud customers over the next 1-2 quarters.
- NAND supply tightness - continued industry supply constraints supporting pricing and ASPs.
- Analyst price target revisions and positive research notes that validate a higher multiple while the growth story remains intact.
Trade plan and time horizons
Entry / Stop / Target (single-leg long):
| Parameter | Value |
|---|---|
| Entry Price | $590.00 |
| Stop Loss | $540.00 |
| Target Price | $760.00 |
Horizon guidance:
- Short term (10 trading days) - expect choppy price action with possible retracements. This is not a short-term scalp trade; use the short window to watch for a disciplined pullback toward the $590 entry.
- Mid term (45 trading days) - this is the primary intended horizon. If AI demand stays visible and analysts keep lifting estimates, the stock should run into the target area within ~45 trading days.
- Long term (180 trading days) - if the company consistently delivers and supply remains constrained, consider rolling position or switching to a position-sized holding; valuations would need to be reassessed on subsequent earnings beats.
Position sizing and execution notes
Given the volatility, keep any single position to a risk allocation that limits downside to a small percentage of portfolio value (for example: risking 1-2% of portfolio on the stop distance from entry). Consider layering in - start with half the size at $590, add on confirmations such as sustained volume on up days or a successful retest of prior breakout support.
Risks and counterarguments
Below are the principal risks that could invalidate this trade or make the target unrealistic:
- Cyclical normalization: NAND and memory markets are historically cyclical. If supply ramps faster than expected, ASPs could collapse, taking revenue and margins down quickly and puncturing the valuation premium.
- Overbought technicals: RSI near 86 signals stretched short-term risk. A sharp correction could erase a large portion of gains before fundamentals catch up.
- Guidance disappointment: The current run is heavily dependent on management execution. If upcoming quarters fall short of the aggressive Q3 guide, multiple contraction is likely.
- Macro headwinds: A rapid move in rates or a stronger dollar can pressure technology capex, slowing datacenter spend and SSD uptake.
- Valuation sensitivity: With EV/EBITDA around ~64x and P/S near 9.5x, the stock requires sustained top-line growth; any deceleration will be punished severely.
Counterargument
There is a legitimate case for waiting on the sidelines: Sandisk has already moved substantially, and short-term momentum is extreme. If you believe the AI infrastructure build cycle will be supply-led rather than demand-led, the recent surge could be a classic 'buy the rumor, sell the news' event. That view argues for waiting for a clear retracement into the $500s or for confirmation over two consecutive quarters before taking a full-sized position.
Conclusion - stance and what would change my mind
My stance: constructive but disciplined long. The combination of a real revenue acceleration (Q2 revenue $3.03B, +81% YoY), margin expansion, strong free cash flow and aggressive forward guidance gives Sandisk the right ingredients for continued re-rating. The trade plan balances momentum capture with explicit protection - entry at $590, stop at $540, target $760 - aimed at a mid-term (45 trading days) swing to harvest follow-through.
What would change my mind:
- A substantive downgrade to Q3 guidance or a miss in the next reported quarter that undermines the AI demand thesis.
- Clear supply normalization evidence - e.g., sudden jumps in NAND capacity that drive ASP weakness and margin compression.
- Macro shock that meaningfully curtails datacenter capex and clouds' storage purchases.
If those happen, I would either tighten stops, reduce size, or exit entirely depending on the severity. For now, the data and the market reaction argue that smart money is reallocating into Sandisk - but only with a plan that respects valuation and volatility.
Trade idea recap: Buy at $590.00, stop at $540.00, target $760.00. Mid-term swing - aim for the target inside 45 trading days while monitoring upcoming earnings, supply signals and margin trajectory.