SanDisk (SNDK.US) has seen two consecutive increases after a sharp decline; can the earnings report confirm the resurgence of AI storage?

SanDisk (SNDK.US) experienced a significant drop in its stock price last month after a previous surge. The company's financial report, released after the market closed on Wednesday, will test whether its strong performance is sufficient to attract investors back. The price of this memory component manufacturer plummeted 47% in July, wiping out over $150 billion in market value, marking its worst monthly performance since going public in February 2025. Although the stock remains the best performer in the S&P 500 index this year, having soared 501%, it has notably retreated from a remarkable 858% increase by the end of June 2026. The stock rebounded this week, rising 6% on Monday and another 11% on Tuesday. The market generally expects SanDisk to report a significant increase in profit and revenue. More importantly, following commitments from tech giants like Amazon.com, Inc. (AMZN.US) and Microsoft Corporation (MSFT.US) to heavily invest in artificial intelligence computing infrastructure last week, SanDisk is also anticipated to provide an optimistic earnings outlook. While both companies saw substantial stock price increases following strong earnings reports, it remains to be seen if SanDisks similar performance will trigger an equivalent rise. Larry Tentarelli, Chief Technical Strategist at Blue Chip Daily, stated, The market is currently very volatile, and we cannot predict how it will react to SanDisk's financial report. I wouldnt be surprised if the stock fluctuated by 10% or 15% after the report is released. The catalyst for SanDisk's stock price plunge was growing market concern over whether the massive investments by large tech companies in AI computing capabilities could be sustained. The company, based in Milpitas, California, is not the only firm suffering from the market sentiment shift. Western Digital Corporation (WDC.US) also plans to release its earnings report after the market closes on Wednesday, with its stock price having fallen 26% since hitting a record high on June 18. The Philadelphia Stock Exchange Semiconductor Index (SOX) faced its worst month since 2008 in July, dropping 21%. Last month, many other AI-related stocks, including Marvell Technology, Inc. (MRVL.US) and Intel Corporation (INTC.US), saw declines exceeding 35%. Analyst expectations suggest that SanDisk is projected to achieve a net profit of $5.5 billion for the fourth quarter ending June 30, compared to a loss of $23 million in the same period last year. Revenue is expected to increase more than fourfold, reaching $8.6 billion. Last week, SK Hynix (SKHY.US), a South Korean memory chip manufacturer closely related to SanDisk, reported disappointing results, indicating that lower-than-expected earnings could trigger significant declines. The company posted operating profit and revenue for the June quarter below analyst forecasts, causing its stock to plummet, with a mid-session drop of 30% in the Korean stock market before recovering slightly by the weekend. Dave Mazza, CEO of Roundhill Financial, noted, The fundamentals of storage are at their best level in a decade, and market expectations have already reflected this. Therefore, unless the performance significantly exceeds expectations and issues higher guidance, it will be difficult to meet the lofty market expectations. SanDisk and Western Digital Corporation are considered high-beta stocks in memory trading, meaning they will see the biggest upside when the market cycle improves, but will also face the most severe declines when it does not. Even with a decline in SanDisk's performance, expectations for its results and outlook may remain high. Data shows that expectations for its earnings per share in fiscal year 2027 have risen by 14% over the past month. We think SanDisk's strength lies in its robust momentum in new business model agreements, said Ben Reitzes, an analyst at Melius. We also believe they have the capacity to repurchase a substantial amount of stock, and they may be willing to do so. Wall Street remains overwhelmingly optimistic about the stock. Of 30 analysts, 25 have given the company a "buy" rating, with no one recommending a sell. The average target price is $2,433, indicating approximately 70% upside potential over the next 12 months. The options market expects SanDisk's stock price to experience a 14% volatility after the earnings report is released. A significant advantage for the company is that last month's sell-off brought its stock price down to the lowest point in over a year. Currently, SanDisk's price-to-earnings ratio is around 7 times the expected earnings for the next 12 months, significantly lower than its average P/E ratio of 11 since going public. Due to the sell-off that began at the end of June, SanDisk's valuation has become more attractive, says Rob Thummel, a senior portfolio manager at Tortoise Capital Advisors, who holds SanDisk shares. However, market expectations remain high.