Morningstar says Sandisk's price peak is near and cuts fair value to $870, 35% below the close

The best quarter of its life, and the stock fell twice

Sandisk▼−11.04% — Sandisk, down 11.04 percent today, the NAND flash memory maker carved out of Western Digital▼−6.71% — Western Digital, down 6.71 percent today in February 2025, reported fiscal first-quarter revenue of $11.03 billion Thursday↗ for the quarter ended October 2, up 378% from a year earlier, at an 85.1% non-GAAP gross margin, and guided December to $12.2 billion to $12.6 billion ¹. It beat consensus on both lines and announced an 8-for-1 stock split effective November 19 ¹². The stock still closed 5.32% lower at $1,330.05 and dropped about 4% more premarket Friday ².

Two camps now contest the same print: Morningstar's cycle camp says the pricing peak is close and the contracts are breakable, and the duration camp, buyers included, is signing memory away through 2030.

The numbers nobody disputes

The validated record, dated October 29: revenue of $11.031 billion; datacenter revenue of $4.802 billion, up 61% sequentially and up from $269 million a year earlier; consumer revenue of $397 million, down 29% as the market absorbs higher prices ¹. Sandisk repurchased about 3.2 million shares for $5.0 billion, spent $378 million on gross capital spending, 3.4% of revenue, and ended the quarter with $5.1 billion of cash and no debt ¹³. The ramp behind those margins is steep enough to run the other way, and it has before.

The contract book is management's math

Unaudited, from the call↗: about half of fiscal 2027 bits and about two-thirds of fiscal 2028 bits sit under long-term new business model agreements, 95% of those partners are investment-grade companies that together generate about $130 billion of operating cash flow, and the pipeline of willing customers runs through 2030 and beyond ³. Chief executive David Goeckeler said one of Sandisk's biggest customers has signed a second round, and some customers came offering the deals themselves ². That is the exhibit the bull case stands on, and it is unaudited.

The prosecution: the peak is on the horizon

Morningstar cut its fair value estimate to $870 from $1,000 Friday morning↗, about 35% below Thursday's close, writing that pricing growth is "decelerating quickly and revenue becoming volume-led," that a pricing peak is on the horizon, and that it still expects a "severe downcycle after the peak" ⁴. Its hardest line lands on the contract book: customers could renegotiate or walk away if market prices fall below agreed levels, and memory producers will significantly expand capacity between 2027 and 2029, bringing prices down ⁴.

Retail sentiment flipped from extremely bullish to neutral as the stock slid ⁴. The bears carry earlier receipts too; the shares, up more than 460% this year, had already lost a quarter of their value in the month before this print ⁴.

The defense: buyers are signing, and the shortage has no end date

Goeckeler called demand "a tremendous pull on our portfolio" ². SK hynix▼−7.61% — SK hynix, down 7.61 percent today, the memory rival, said its supply is not keeping up with market growth and expects demand to exceed supply through 2030; its chief executive Kwak Noh-Jung said in August the shortage shows no clear signs of easing through the end of 2030↗ ²⁶. Samsung expects AI-driven demand to tighten shortages further in 2027 ².

Morningstar itself concedes the AI demand growth is real ⁴; its case is about price, not volume. Bulls hold earlier marks on file, including a Goldman case for a $150 billion Sandisk two weeks before the print ⁵.

Cross-examination: the shortage nobody is building against

The court speaks once. The loudest 2030-shortage call belongs to a company that cannot currently fund its next NAND plant ⁷. SK hynix scrapped the roughly $10 billion US listing of its Solidigm flash unit on October 22↗ after regulatory and shareholder opposition, and halted pre-IPO investment talks ⁷. Solidigm's planned US NAND factory leans on higher output from its partially equipped Dalian fab in China, which needs American equipment licenses for 2027 that had not been issued ⁸.

Sandisk, for its part, spends 3.4% of revenue on capex and handed shareholders $5 billion in a single quarter ¹³. Everyone in memory is selling duration into a shortage that none of them is building against.

Verdict watch: two dated readings decide it

The December quarter reports in late January with a split-adjusted earnings guide of $6.88 to $7.13 ³. Two numbers on the same page settle the argument: whether pricing growth decelerates again, Morningstar's tell, and whether long-term agreement coverage climbs past half of fiscal 2027 bits, Sandisk's ³. The other file is Solidigm's funding path, which decides whether rival capacity arrives before the contracts do. Buyers paid for certainty through 2030 ³. The next reading prices whether certainty holds.