Parkev Tatevosian, CFA on $SNDK (Nov 9, 2026)

It was a bloody day for artificial intelligence stocks, including SanDisk, whose shares fell by more than 22% in a single day. Even worse, SanDisk's stock fell by 53% last month, even though the company announced its financial results a week ago and they were very strong.

The company generated revenues of $11 billion, an increase of 378% compared to the same period last year. The company generated operating cash flows of $5.7 billion. This means an operating cash flow to sales ratio exceeding 50%, and the valuation was already cheap before the start of this week and the results of the midterm elections.

Therefore, one theory is that the Democrats' control of the House of Representatives, the Senate, and many governorships, in addition to referendums on data centers, will slow down their construction, and consequently reduce demand for SanDisk products and services.

This is what is causing the large sell-offs in artificial intelligence stocks today, and in particular in SanDisk stock. So, what is my opinion on these moves? Does this make SanDisk stock a buying opportunity today, or is it a reason to get rid of the stock and avoid the company until we get more information about the results of this election?

I liked the conclusion of this article on Yahoo Finance, which was discussing the sell-off in Micron and SanDisk shares today, where they stated the following.

One thing to realize about SanDisk is that the stock price was already undervalued, and now it is excessively undervalued. It is trading at a forward price-to-earnings ratio of only 2.8, only 2.8.

Therefore, the market was not pricing SanDisk stock as if these prosperous times would last forever. The market was already pricing SanDisk's stock in what appeared to be a short-term boom for their business.

Eventually, it will reach its peak, then business will stabilize at that level and no new data centers will be built.

SanDisk will generate revenue from existing customers by replacing older components installed in these data centers with newer, next-generation components every few years. This is what was priced for this stock.

It was not priced as if sales were going to continue to boom excessively for several consecutive years.

In fact, in my free cash flow model for SanDisk, I expect the business to boom in fiscal years 2027 and 2028, and then for growth to slow considerably from that point onward.

I estimate free cash flow will grow from $8 billion in 2026 to $31 billion in fiscal year 2027, then grow well again to $38 billion in...and after that, very, very slow growth from that point onwards, right?

It grows from 38 billion to 41 billion, and then from that point onwards, slower growth even from 41 billion to 42.4, then to 43.9, then to...

So the idea is, very slow growth from that point onwards as SanDisk generates revenue from replacement demand and innovation, which means higher average selling prices compared to the generation of components that will be replaced every few years, and that's how the business grows.

And even with SanDisk's optimistic, or rather not very optimistic, growth projections starting in 2029, the fair value estimate for the company that I came up with is $1,808.

The current market price after today's significant drop is $806, so it is significantly undervalued after the stock price fell by about 50% in a very short time. Therefore, I rated SanDisk stock as a buy opportunity all year, and confirmed that on August 11, so I am disappointed to see the stock price decline so drastically.

But today I raise my level of conviction regarding this purchase rating.

Throughout the year I rated it as a "buy" but I was, uh, with a low level of confidence and low conviction in that buy rating when prices were much higher than they are today. But today, at these lower levels, I am raising my conviction to medium and reaffirming this buy rating as of November 5, 2026.