Sandisk (SNDK 1.93%) stock has been one of the hottest buys over the past year, rising by over 2,500%. It's an incredible performance that has resulted in its valuation swelling to a market cap of over $130 billion. The insatiable demand for its memory and storage products has been through the roof due to artificial intelligence, and investors have been loading up on the stock in anticipation of potentially stronger results ahead.
Recently, this red-hot Nasdaq stock received more great news: it will be joining the Nasdaq-100 index, which is a collection of the top non-financial stocks on the exchange. Could it lead to even more gains for Sandisk investors?
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Will this lead to a higher price for Sandisk stock?
The Nasdaq-100 is an exclusive club, and Sandisk joining those ranks may help its share price rally further. That's because it means the stock will be included in more funds and portfolios. While retail investors may have been driving up its share price over the past year, now, a broader mix of investors who simply track the Nasdaq-100 through exchange-traded funds will have exposure to it. Sandisk will officially join the index on April 20.
It could very well get a boost from the addition to the index, but investors shouldn't assume that it's a sure thing. There has been some hesitance in the tech sector this year. The Invesco QQQ Trust, which tracks the Nasdaq-100, is only up around 2% thus far, and that's only due to a recent rally; otherwise, its returns would be worse. And the inclusion of Sandisk, which some investors may believe is overdue for a pullback, may give risk-averse investors additional reason to reduce exposure to the Nasdaq-100.
NASDAQ: SNDK
Key Data Points
Should you buy Sandisk stock right now?
Sandisk is benefiting from a shortage in the demand for flash memory storage, which is driving up prices in the process. That's why even though it has rallied so much over the past year, it's trading at a modest forward price-to-earnings multiple of 19, based on analyst expectations. There's still much more growth expected from the business in the near future.
Between the ongoing demand for memory and now Sandisk also being part of the Nasdaq-100, there are multiple reasons to remain bullish on the growth stock. It can still be a terrific buy, but investors should also consider the risk, because once there isn't a shortage and prices come down, the stock could be due for a big pullback.
