Why Sandisk Stock Popped, Then Dropped Today
Key Points
Sandisk stock bounced back early from yesterday's sell-off.
Then Mizuho bank announced it's cutting its price target on Sandisk stock.
Sandisk's stock rally has been cut short.
- 10 stocks we like better than Sandisk ›
Sandisk (NASDAQ: SNDK) stock got off to a great start Tuesday, bouncing back nearly 5% after yesterday's China-inspired sell-off -- but it didn't last.
Shares of the NAND flash memory-maker reversed course later in the morning, even dipping into the red. As of 12:05 p.m. ET, Sandisk stock is still up from yesterday's close -- but only 1%.
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What's worrying Sandisk investors today?
One imagines the stock is still being dogged by worries that, to mitigate the effects of global memory shortage, the Trump Administration will permit Apple -- and potentially others -- to purchase memory chips from Chinese suppliers ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies Corp (YMTC).
CXMT recently conducted an IPO in Shanghai that added $8.6 billion to its war chest amid plans to increase production of DRAM chips and begin producing high-bandwidth memory for the artificial intelligence market. And while CXMT doesn't compete directly with Sandisk (CXMT makes DRAM, while Sandisk makes NAND), YMTC does -- because YMTC is a NAND specialist.
And YMTC has also filed for an IPO that could raise billions in new cash.
Wall Street's getting nervous
Perhaps recognizing this threat, Japanese investment bank Mizuho this morning cut price targets "across the semiconductor space citing multiple compression," as TheFly.com reports.
Memory demand is still increasing, and so Mizuho didn't cut its estimate for Sandisk by much, really just tweaking it down from $1,900 to $1,875. But the fact that Mizuho chose to lower its estimate at all in the face of still-rising demand feels like a signal that Wall Street is starting to take a more cautious stance.
Sandisk stock may look cheap at 20x earnings, with Wall Street forecasting 40% annual earnings growth over the next five years. If analysts start cutting growth estimates, though, look out below.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
