SanDisk (SNDK.US) financial report explodes but stock drops! Goldman Sachs Group, Inc.: significantly raise target price, stock price will eventually rise.

Financial reports and guidance both exploded, but stock prices fell first - behind this, there is a market logic about "expectations being too high." According to the wind tracking trading platform, on April 30, SanDisk (SNDK.US) released its first quarter financial report for the 2026 fiscal year. That evening, a research report from Wall Street was immediately released, providing a detailed interpretation of this financial report and the company's outlook. Goldman Sachs Group, Inc. believes that the short-term decline is more about emotions and position releases, rather than fundamental issues. The bank stated, "We expect the stock price to eventually rise," and significantly raised its 12-month target price from $700 to $1200, with an average EPS forecast increase of about 55%. Why did a "blown out financial report" lead to a decline? The financial data itself had no suspense - it exceeded expectations across the board, and the degree of surpassing was quite amazing. In the first quarter, SanDisk's revenue was $5.95 billion, 16.6% higher than the analyst's expected $5.101 billion, and 24.5% higher than the market's overall expected $4.781 billion. Gross margin reached 78.4%, nearly 9 percentage points higher than the analyst's expected 69.8%. Non-GAAP earnings per share were $23.41, 37.7% higher than the analyst's expected $17.00, and nearly 55% higher than the market's overall expected $15.11. However, the stock price fell by 6% after the report was released. Before the financial report was released, SanDisk's stock price had already experienced a significant rise - with tight NAND storage supply and demand, explosive demand for data center SSDs, and continued industry price expectations, these positives had already been digested by the market in advance. Investors' expectations had been pushed to a fairly high level before the financial report was released. In the words of the report, "We believe that due to the significant rise in stock price before the financial report, investor expectations have already increased significantly." In other words, even if the financial report is good, it needs to exceed the "already high expectations" in order to drive the stock price further upward. The short-term decline is more about emotions and position releases, rather than fundamental issues. The second quarter guidance: another significantly surpasses expectations If the first quarter financial report was "surpassing expectations," then the second quarter guidance is "again surpassing expectations." SanDisk's midpoint revenue guidance for the second quarter is $8 billion (range $7.75 billion to $8.25 billion), 20.3% higher than the analyst's expected $6.649 billion, and 14.8% higher than the market's overall expected $6.968 billion. The gross margin guidance is 80%, about 5.5 percentage points higher than the analyst's expected 74.5%. Non-GAAP earnings per share guidance is a range of $30 to $33, with a midpoint of $31.50, 30.1% higher than the analyst's expected $24.21, and 21.3% higher than the market's overall expected $25.96. Compared to the previous quarter, the midpoint revenue guidance for the second quarter is about 34.5% higher than the actual revenue in the first quarter, with a year-on-year increase of up to 372%. These numbers leave almost no room for disappointment. $42 billion supply agreement: securing the future, but further observation is needed Another important information disclosed in the financial report is the progress of SanDisk's "New Business Models" (NBMs). In simple terms, SanDisk is signing long-term supply agreements with customers - customers lock in supply in advance, and SanDisk gets stable and predictable income. This is similar to a "pre-sale + long contract" model, which benefits both parties: customers do not have to worry about supply shortages, and SanDisk can secure income and profits in advance. Currently, SanDisk has signed five of these agreements and is actively negotiating with other customers. The total contract value of these three agreements reached $42 billion, including $11 billion in guaranteed revenue and $4 billion in prepayments. These three agreements cover about 35% of SanDisk's FY27 planned capacity, and management expects this proportion to increase further in the future. The report evaluates this as follows: "We believe these agreements are a positive first step, but it is too early to announce a structural industry change until more information on the details of the agreements and the scope of customers is obtained." NAND supply and demand: Continuously tight, gross margin still has room for growth SanDisk management explicitly stated during the financial report conference call that the NAND industry will continue to be in a state of tight supply throughout 2026 and beyond. The company currently has no plans to change the annual bit supply growth rate of about 20%. At the same time, enterprise market demand is accelerating - the growth rate of enterprise bit demand in 2026 is expected to exceed 60%. The report believes that with the dual drivers of limited supply and accelerated demand, SanDisk's gross margin still has room for further improvement, although the extent of the expected increase may narrow given the background of the company's 80% gross margin guidance. Enterprise SSDs: Starting from a small base, significant room for market share growth SanDisk's enterprise SSD (eSSD) business is growing rapidly. Currently, data center products account for 25% of the company's total revenue. On the product side, SanDisk has completed the certification of TLC enterprise solid-state drives for multiple hyperscale cloud computing customers, and plans to start shipping QLC enterprise solid-state drives in the June quarter. The report concludes: "We believe that SanDisk will achieve a significant increase in market share in this market in the coming quarters, starting from a relatively low base." Significant increase in target price, comprehensive upward revision of EPS forecasts Based on the above assessments, the report significantly raised SanDisk's 12-month target price from $700 to $1200, an increase of 71%. The target price is based on a PE ratio of 22 times (unchanged multiple), and the corresponding normalized EPS estimate has been raised from $32 to $55. Based on the stock price of $1096.51 at the time of the report's release, the potential upside corresponds to about 9.4% to 9.8%. Regarding EPS forecasts, the report increased the average forecast for each year by about 55%: the CY2026 EPS forecast was raised from $101.90 to $155.00, an increase of 52.1%; the CY2027 EPS forecast was raised from $127.50 to $207.00, an increase of 62.3%; the CY2028 EPS forecast was raised from $120.00 to $177.00, an increase of 47.5%. The report also points out that positive reactions are expected for Micron, as Micron also has exposure in the NAND terminal market. This article is a reprint from "Wall Street View"; GMTEight Editor: Yan Wencai.