Sandisk (SNDK -1.90%) has been the best-performing stock in the S&P 500 this year, rising by around 550%. That's well above second-place Moderna, which has risen by around 420%. With a stellar performance like that, some investors may be surprised to learn that Sandisk is actually down more than 30% from the all-time high it established at the end of June.
I think now could be the perfect time to buy Sandisk stock, as the trends that pushed it higher at the start of the year are still prevalent. These conditions will stick around for a while, and could be exactly what is needed to propel Sandisk to new highs before the year is over.
Image source: The Motley Fool.
The memory chip shortage isn't going to be resolved anytime soon
Sandisk makes memory chips and devices that go into them. It focuses on NAND memory, which is used in long-term storage products such as flash drives and solid-state drives (SSDs). SSDs are widely used in data centers, and they're consuming the majority of NAND chips in the market. Data centers have eaten up so much of the memory that produces are able to manufacture that there isn't enough to meet market-wide demand, so prices have been rising sharply. Until the balance between supply and demand shifts out of shortage, prices could continue rising, which will further help Sandisk's top and bottom lines.
NASDAQ: SNDK
Key Data Points
Because Sandisk's input costs aren't changing much, the revenue growth coming from its price increases flows down to the bottom line as pure profit, and that has delivered incredible results for Sandisk and its peers. During Sandisk's fourth quarter of fiscal 2026 (which ended July 3), its revenue rose 51% quarter over quarter. Management attributed two-thirds of that growth to increased prices and another third to higher production output. While all of the major memory makers are working on adding new production capacity, those foundries won't be online until 2027 or 2028, so it's possible that prices could continue soaring, boosting Sandisk's revenue and profits over the next few years.
For Sandisk's fiscal 2027 (which ends June 28, 2027), Wall Street expects an incredible 142% revenue growth rate. However, the market is skeptical that Sandisk will be able to hold on to those gains over the longer term, which is why the stock trades for a mere 7 times forward earnings.
SNDK PE Ratio (Forward) data by YCharts.
If Sandisk can rise throughout the year to the 30 times forward earnings price tag established at the end of its fiscal year, the stock is primed to quadruple. I'm not sure if it will rise that much, but a double seems well within the realm of possibility. That leads me to conclude that it's well worth an investment, as it's hard to find stocks that could easily double in price in under a year's time.
