Demand for artificial intelligence infrastructure has led to an unprecedented supply shortage in memory chips. Sandisk (SNDK 4.89%) has benefited, its share price increasing 1,290% in the past year. But the situation has been a headwind for Everpure (PSTG 1.98%), a company that buys large amounts of NAND flash memory to build data center storage solutions.
The International Data Corp. says memory chip supply shortages could last well into 2027, but production will catch up with demand at some point, causing prices to stabilize (or even fall). When that happens, Sandisk will suffer and Everpure (formerly Pure Storage) will benefit as supply chain pressures ease.
That may explain why most Wall Street analysts covering the companies rate Everpure as the better buy:
- Among 23 analysts, Sandisk has a median target price of $725 per share. That implies 12% upside from its current share price of $649.
- Among 23 analysts, Everpure has a median target price of $90 per share. That implies 36% upside from its current share price of $66.
Here's what investors should know about Sandisk and Everpure.
Image source: Getty Images.
Sandisk: 12% upside implied by Wall Street's median target price
Sandisk develops data storage solutions based on NAND flash technology. Its products include external solid-state drives (SSDs) for data centers and consumers, as well as embedded flash drives for original equipment manufacturers (OEMs), who integrate the hardware into personal computers, automotive systems, mobile devices, and video game consoles.
Sandisk acquires memory wafers at a low cost through its joint venture with Japanese chip manufacturer Kioxia. The companies split capital expenditures and R&D expenses related to equipment, process technology, and memory design (especially 3D stacking). Sandisk then packages wafers into chips, and integrates chips into final products.
NAND flash memory plays an important role in supporting artificial intelligence (AI), and demand for AI infrastructure has created such a profound supply shortage that enterprise SSD prices have roughly tripled in the past year. As a result, Sandisk's earnings increased 404% in the January quarter. But the situation will probably reverse just as quickly at some point in the future.
"Memory cycles can turn on a dime," says William Kerwin at Morningstar. "The moment supply exceeds demand, pricing can crater." Kerwin also says Sandisk lacks a competitive moat because memory chips are commodities without pricing power. In other words, there is nothing particularly unique about Sandisk that gives it a material edge over suppliers like Samsung, SK Hynix, and Micron.
Wall Street expects Sandisk's adjusted earnings to grow at 420% annually through fiscal 2027 (ends in June). That makes the current valuation of 90 times earnings look cheap. But the market will almost certainly afford Sandisk a much cheaper valuation once it becomes clear the memory cycle has peaked, which means the stock could fall sharply at some point in the future.
NASDAQ: SNDK
Key Data Points
Everpure: 36% upside implied by Wall Street's median target price
Everpure builds all-flash storage solutions. Its DirectFlash modules offer two to three times the storage density and consume about half the power as the next closest flash memory product on the market. And its Evergreen architecture supports nondisruptive hardware and software upgrades, forming the basis of its subscription portfolio.
Here is the big picture: While Sandisk provides enterprise SSDs and embedded flash drives, Everpure brings together proprietary flash hardware, software, and services to create an unified storage environment. Its platform (the enterprise data cloud) integrates file, block, and object storage across public and private clouds.
Consultancy Gartner recently ranked Everpure as the best enterprise storage platform on the market, listing automation features, data management capabilities, and high customer satisfaction scores as key strengths. Erik Woodring at Morgan Stanley says Everpure has been gaining share because of its differentiated products, and he expects that to continue this year.
Everpure reported encouraging financial results in fiscal 2026 (ended in January). Revenue increased 16% to $3.6 billion, and non-GAAP operating income increased 14% to $635 million, with operating margin contracting only modestly despite increased NAND prices and R&D spending. That means margins could expand once NAND prices stabilize.
Indeed, Everpure gave upbeat guidance that implies margins will expand in fiscal 2027. The company expects revenue growth to accelerate to 18%, while adjusted operating income growth accelerates to 25%. Yet, Wall Street's consensus puts adjusted earnings growth at only 16%. The current valuation of 32 times earnings is reasonable even if that figure is accurate, but Everpure could crush expectations, especially once NAND prices stabilize. That could drive big gains in the stock.
