Bernstein Raises Sandisk Price Target to $3,000

Bernstein SocGen Group analyst Mark C. Newman raised the price target on SanDisk (NASDAQ: SNDK) to $3,000 (from $1,700) while maintaining an Outperform rating.

“Upfront financial commitments provide real downside protection and aren’t the same as previous take or pay arrangements. One major misconception of these new financial commitments is to view it as a static portion of the contract. In reality, this ratio is dynamic.

As time passes and revenue gets recognized, the remaining contract value declines. Therefore, the same amount of financial guarantee is applied to a progressively smaller remaining obligation, increasing its relative coverage of the LTA tail and effectively strengthening protection in the latter part of the contract (when it is more likely to be needed!).

We believe this is not understood by the Street. Significantly higher floor price for SNDK, but longer contract term for MU. Based on the data provided by companies we estimate SNDK’s floor price in recently signed LTAs is $0.29/GB, inline with our CQ2’26 ASP.

This compares to a floor price for MU meaningfully below CQ2’26 levels. However, MU’s LTAs appear to be mostly 5years vs SNDK’s 3-5years. While these LTA’s do not completely remove risk of future downcycles, they do significantly alleviate downside risk.

We analyze scenarios of mild downturn to a price collapse worst than 2010, and find that downside to earnings in the outer years of SNDK LTAs (FY29 and FY30) is significantly more muted than without LTAs with the latter years having significantly more downside protection.

This is all assuming the worst case that customers walk away from contracts if they can save just $1. With 60% of volumes on these LTAs, SNDK FY30 EPS would still be $214 with a 72% peak to trough ASP decline to $0.11 (or 60% below “floor prices”).

This compares to $81 EPS without LTAs. We increase SNDK FY27 and FY28 EPS to $243 and $272 respectively in our base case, and $350 and $400 in our bull case. These higher numbers reflect the rising price environment to continue stronger for longer, plus more sustainability and thus less steep blended average prices in a downturn (currently assumed starting in CY28).”

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