Usually, a big drop in a stock’s price after earnings is seen as a red flag. But for memory chipmaker Sandisk, it actually led to a new upgrade.
On Monday, Argus Research upgraded Sandisk and set a 12-month price target much higher than where the stock is now. After the upgrade, Sandisk shares rose 2.2%.
Back in July, Argus Research was neutral on Sandisk, saying it wanted a better entry point. Now that the stock is trading at about half its peak, the firm believes that opportunity has come. Besides the lower price, Argus also sees the start of several years of faster revenue growth and bigger profit margins.
Sandisk shares ended last week a bit lower, but that small drop hid some big swings. The stock fell almost 7% on Thursday after a weak outlook took the shine off strong quarterly results, and it dropped again on Friday.
Looking at the bigger picture, Sandisk has dropped a lot since its record high on June 25. Shares are now down 47% from that peak and are well below their 50-day moving average. Even so, the company’s core business is still strong. Demand for memory parts is much higher than supply, as companies buy hardware for AI infrastructure. Big cloud providers like Amazon, Meta Platforms, and Alphabet are spending hundreds of billions on new data centers.
Argus Research says revenue is growing much faster than costs, so it expects profit margins to keep expanding. The firm thinks this makes now a good time to buy the stock.
Despite the recent drop, Sandisk is still one of the top performers this year, with shares up a lot both year-to-date and over the past 12 months. With that in mind, investors are deciding when to buy in, and Argus Research says now could be the right time.
