Storage chipmaker SanDisk saw its stock crash despite delivering stellar quarterly results and issuing highly optimistic forward guidance. On Thursday, SanDisk's shares plummeted approximately 20%, succumbing to broad tech sector sell-offs, concerns over factory costs, and doubts about the sustainability of the NAND flash memory rally—erasing prior gains.

Just days earlier, the company had garnered market enthusiasm with robust Q1 earnings and Q2 guidance that far exceeded expectations, with analysts setting price targets as high as $230–$300. However, in the cyclical memory chip industry, strong growth narratives alone are insufficient. Scrutiny over profit margins and valuations has resurfaced as a key market focus.

**Strong Performance, but Cost Concerns Emerge** The immediate trigger for the sell-off wasn’t negative news specific to SanDisk. The company reported Q1 revenue of $2.31 billion, up 23% year-over-year, with EPS of $1.22 crushing estimates of $0.58. Management also raised guidance, projecting Q2 EPS of $3.00–$3.40 (versus consensus $1.77) and revenue of $2.55–$2.65 billion. Yet beneath these figures lay constraints: roughly $60 million in elevated wafer fab startup costs and an additional $10–$15 million in underutilization charges continue to pressure near-term margins. Goldman Sachs analysts noted that while margins should "improve meaningfully" as fab costs subside, the timeline remains uncertain. SanDisk’s Q2 margin is projected at 29%, notably below the expected 31.2%. For a stock that has surged over 600% since its spin-off from Western Digital in February 2025, this margin gap fails to satisfy investor expectations.

**NAND Market Overheating and Valuation Risks** Broader NAND market volatility has amplified investor unease. Memory chip prices have soared recently, with Western Digital hiking NAND contract prices by 50% in November, while spot prices for 1TB TLC NAND nearly doubled from $4.80 in July to $10.70. Goldman’s analysis indicates a 5% supply deficit in the NAND market. However, such aggressive pricing risks triggering inventory hoarding and margin uncertainty—demand could collapse once customers finish restocking. Most critically, SanDisk’s valuation had stretched to extreme levels. Before Thursday’s plunge, its stock traded well above MarketBeat’s consensus target of $183, with a P/E ratio nearing 765x—leaving little safety margin for momentum-driven investors. Earlier analyst targets had reached $230–$300. Views remain split: Bernstein and Fox Advisors maintain "Strong Buy" ratings, citing tight NAND supply-demand dynamics, while Weiss Ratings insists on "Sell," flagging valuation and execution risks. Goldman suggests that for stabilization, investors need clarity on meaningful fab cost reductions by 2026 and sustained NAND pricing stability amid tightening supply. Failure on either front could prolong the correction.