Barclays significantly raised its target price for SanDisk (SNDK.US) to $2300, stating that industry supply-demand imbalance may continue until 2027.

Barclays has upgraded SanDisk (SNDK.US) from "Hold" to "Buy" and raised its target price significantly to $2300. It is worth noting that SanDisk was unable to maintain its pre-market gains after the opening, and as of the time of writing, the stock has fallen by over 2.6%, trading at $1548.9. Barclays analyst Tom O'Malley stated in the report that, in the current AI industry chain, besides AI accelerator chips, storage and memory sectors are the most attractive sub-sectors. He pointed out that with the continuous explosion of AI demand, the global storage industry supply-demand imbalance is expected to last at least until 2027. O'Malley stated that the industry is undergoing structural changes, and these changes are significantly improving the future profit stability and bargaining power of storage manufacturers in the coming years. Analysts have pointed out that the storage industry has historically been seen as a typical cyclical industry with volatile prices and poor profit stability. However, the rapid growth in demand for AI servers, High Bandwidth Memory (HBM), data centers, and enterprise storage is changing the entire industry logic. O'Malley is particularly optimistic about SanDisk's innovative ability in contract models. He stated that SanDisk is one of the industry's "most aggressive and structurally innovative" companies. According to information disclosed in the company's previous earnings conference calls, SanDisk is currently aggressively promoting a "new business model". In this model, the company signs long-term supply agreements with customers to ensure future supply and demand stability for both parties. Some contracts even extend to 2031 and include quarterly increasing procurement commitments. O'Malley revealed that three contracts signed by SanDisk in the last quarter could bring the company approximately $42 billion in revenue at the lowest. Additionally, these contracts come with over $11 billion in financial guarantees. Some of these are customer advance payments. SanDisk has already recognized around $400 million in advance payments on its balance sheet for the third quarter. Another portion comes from financial instrument support provided by third-party Financial Institutions, Inc. O'Malley stated that this long-term locked supply-demand contract model has become one of the most popular forms of collaboration in the entire AI storage ecosystem. For customers, this means being able to secure critical storage chip supply in advance; while for SanDisk, it means significantly increased revenue visibility and a more stable future market outlook. He further pointed out that this contract structure is fundamentally changing the entire business model of the storage industry. "It allows storage manufacturers to systematically allocate capacity and business in the future, while significantly enhancing the industry's defense capabilities in downturns."