Most of what I'm reading is focused on increasing profits and decreasing P/E ratios at $SNDK, the combination of which sounds incredibly bullish. So what will I do? I'll play devil's advocate and focus on memory pricing growth decelerating sequentially at Sandisk. Why is this a big deal IMO? It's a big deal because it's happening earlier and faster than some analysts expected (per Morningstar), which likely means peak pricing is just around the corner. What happens after a pricing peak is anyone's guess, but I think we'll see a huge downturn in pricing following the peak. Their biggest customers will demand contract renegotiations as prices fall below contractual levels. Sandisk's management says contracts are locked, but I say never underestimate the leverage big tech holds over its vendors. FWIW... My opinion dominoes into Sandisk's competitors as well, especially $MU & $SKHY. I know this goes against the sentiment of many and that's OK. Maybe I'll be proven wrong! It wouldn't be the first time and definitely won't be the last...
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6 Comments
Ronan @ronan · 4d
Great point Scott, and I agree valuation I think is irrelevant to the memory cycle (and yes still cyclical) It actually seems far more simple to me than most industries in this scenario: It’s simple supply and demand Demand has rapidly increased from a few major providers that have allowed drastic triple digit growth. When that demand dips, so does returns. The only reason these businesses like Micron and SanDisk have such cheap multiples is because demand practically spiked overnight. It was very momentum based, not really earnings based. It just happened to be so much at once valuations got so cheap When it comes to AI the market is currently trading on demand and hype, it’s been very clear. Even though valuations seems so “cheap”, earnings are from an influx of massive market demand, not a long-term catalyst (at least for every business, and it’s definitely not guaranteed)
Mason Nordli@mnordli22 · 4d
A lot of people are saying memory isn’t cyclical anymore… history says otherwise. I love seeing the risk side of a stock instead of always seeing bullish posts. Do you think we see big tech pull the plug on their open cheque book for ai infrastructure buildout that so many stocks rely on??
ETF Go
@etf.go · 4d
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