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Investing.com -- Sandisk shares have surged roughly 2,740% over the past year, but analysts at Evercore ISI believe there is more upside left in one of the hottest stocks on the market.
The firm on Monday initiated coverage of the NAND flash memory maker with an Outperform rating and a $1,200 price target, calling the stock "a structural AI beneficiary." That price objective implies 26% upside from the current levels around $952, while pegging a bull case at $2,600.
Evercore’s 12-month target reflects 12 times the firm’s fiscal year 2027 (FY26) earnings per share (EPS) estimate of $99.49, which sits well ahead of the current Wall Street consensus of $94.49.
Sandisk shares rose more than 2% in premarket trading Tuesday.
The broker’s bullish stance rests on the view that the current NAND upcycle is more resilient than prior ones. Analysts including Amit Daryanani argue that AI-driven demand for data storage is structurally tightening the supply-demand balance in ways that should sustain elevated pricing through at least 2027.
Part of what makes this cycle different, the analysts argue, is the emergence of long-term strategic contracts - Strategic Contractual Agreements (SCAs) - between cloud companies and NAND suppliers that include upfront cash payments and pricing floors.
This provides memory makers like Sandisk with improved demand visibility and limits the kind of oversupply that has historically derailed the sector. Supply discipline is also holding, with industry bit demand outpacing supply growth into 2026 as capital increasingly flows toward DRAM and high-bandwidth memory (HBM) instead of NAND.
"Unlike prior cycles characterized by aggressive capacity additions, vendors are now focused on supply-demand alignment and return optimization rather than pure bit growth," the analysts wrote.
Another key factor is Sandisk’s long-standing manufacturing joint venture with Japan’s Kioxia, which gives Sandisk access to roughly 40% of total production without bearing the full capital burden of a fully integrated chipmaker.
"This allows SNDK to operate at scale without bearing the full capital burden, supporting superior through-cycle margins, strong FCF, and a more efficient capital profile versus fully integrated peers," the analysts said.
The team also flags a shift in Sandisk’s revenue mix toward higher-margin data center customers, who currently account for less than 15% of total sales. They expect that share to exceed 20% by fiscal 2027, driven by demand from hyperscalers and the ramp of new products including Sandisk’s BiCS8 218-layer NAND chip.
The analysts see a credible path to earnings per share exceeding $130 over the medium term, driven by stronger-than-expected NAND pricing, faster cost reductions, bit demand growth, mix shift toward enterprise storage, and a potential share buyback program.
On valuation, Evercore notes that Sandisk currently trades at roughly 8 times forward earnings, below its historical average of around 10 times. The analysts believe the discount does not fully capture the improving fundamentals.
"We view SNDK as transitioning from a cyclical memory name to a structural AI beneficiary, with a favorable risk/reward. While we remain mindful of eventual NAND pricing normalization, we believe the current setup offers NT EPS upside + multiple expansion potential not fully reflected in valuation," the analysts wrote.
Possible risks to Evercore’s bullish thesis include a faster-than-expected supply response from Samsung, SK Hynix, Micron or Chinese producers, rapid average sell price (ASP) normalization, execution challenges in penetrating hyperscaler accounts, and a potential slowdown in AI infrastructure spending.
