Morgan Stanley maintains Overweight on SanDisk and raises the price target to $1,100

Overview

Morgan Stanley released a pre-earnings / valuation update report on SanDisk Corporation, with the core conclusion of maintaining Overweight and raising the price target from $690 to $1,100. The report believes NAND pricing momentum remains strong into Q2, while AI and hyperscaler demand continue to crowd out other NAND supply, driving substantial upward revisions to earnings expectations; however, since the share price has already risen significantly over the past month, the T+1 reaction after earnings is not easy to predict.

Core views

The core views include: first, the market already understands the near-term NAND upcycle, and the next key question is whether price increases and cash flow can be sustained. Second, assumptions for Q1 and Q2 pricing, volumes, and gross margin were all raised, with Q2 pricing expected to increase 50% q/q and volumes to grow 10% q/q. Third, multi-year LTAs and customer prepayments may gradually appear on the balance sheet in 2026, becoming key evidence of durable demand. Fourth, although the report remains constructive on SanDisk, it also acknowledges that DRAM is still the more severe bottleneck in AI growth, and the long-term durability argument leans more toward DRAM.

Analysis framework

The report combines upward earnings revisions, NAND supply-demand and pricing tracking, peer valuation comparisons, through-cycle EPS valuation, and risk-reward scenario analysis. In valuation, it does not directly use peak earnings; instead, it raises through-cycle EPS from $30 to $48 and applies the 23x semiconductor group multiple to derive the $1,100 price target.

Methodology notes

• Valuation methodsthrough-cycle EPS multiple

  through-cycle EPS valuation

  The report does not value the company directly on peak earnings, but instead uses through-cycle EPS of $48 multiplied by a 23x valuation multiple to derive the $1,100 price target.

• financial_modelMorgan Stanley ModelWare

  Morgan Stanley ModelWare framework

  The report states that unless otherwise noted, the relevant metrics are based on the Morgan Stanley ModelWare framework.

• consensusRefinitiv Estimates

  consensus comparison

  The report compares Morgan Stanley's forecasts with Refinitiv consensus estimates, emphasizing that Q2, CY26, and 2027 EPS are all significantly above market consensus.

• scenario_analysisRisk Reward

  bull-bear scenario analysis

  The bull-case price target is $1,500, based on 25x through-cycle EPS of $60; the base case is $1,100; and the bear case is $600, based on 20x through-cycle EPS of $30.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• SNDK.US

  Covered name; maintains Overweight and raises the price target

  Strengths

  Strong NAND pricing, improving eSSD and data center SSD demand, significant upward revisions to cash flow and EPS expectations, and FCF valuation still seen as undervalued.

  Weaknesses

  The near-term strength is already understood by the market, the share price has risen about 60% over the past month, and the short-term reaction after earnings is difficult to predict.

  Comparison

  Versus MU, SNDK is valued at about 6.5x new 2027 FCF, while MU is around 10x; however, the report believes the long-term durability argument still leans more toward DRAM.

  Risks

  NAND demand coming in below expectations, an industry capex rebound, failure to gain share in the data center market, and continued share gains by Chinese manufacturers.

• NAND

  Core cyclical driver for SanDisk

  Strengths

  AI and hyperscaler demand are driving price increases, Q1 and Q2 ASPs are improving significantly, and supply expansion remains limited.

  Weaknesses

  Demand durability and the execution of long-term agreements still need verification, and product and process mix will affect actual pricing performance.

  Comparison

  Relative to DRAM, NAND is also one of the bottlenecks associated with AI growth, but the report believes the DRAM bottleneck is more severe and long-term durability is stronger.

  Risks

  Industry bit growth below expectations, supply recovering faster than expected, and a pullback in price gains.

• MU

  Peer reference for valuation and cycle durability

  Strengths

  DRAM has a more pronounced bottleneck characteristic in AI growth, and the report notes a 25x through-cycle multiple target for MU.

  Weaknesses

  The report is not focused on MU; it is mainly used for comparison with SanDisk in terms of valuation and business characteristics.

  Comparison

  SanDisk uses 23x through-cycle EPS, below MU's 25x, because SanDisk has lower direct AI exposure, though its historically higher FCF conversion can partly offset that.

  Risks

  If the market prefers DRAM over NAND, SanDisk's relative valuation could come under pressure.

Key data

• Price target revision$690 → $1,100Both the report title and the change table show that the price target was raised.
• Current share price$989.90As of the close on April 24, 2026.
• Implied upside+11.12%Upside of the base-case target price versus the current price in the risk-reward chart.
• RatingOverweightMorgan Stanley maintains Overweight.
• Industry ViewAttractiveThe report table shows Industry View as Attractive.
• Q2 EPS versus consensus+37%The report says the new Q2 EPS estimate is 37% above consensus.
• CY26 EPS versus consensus+65%The report says the CY26 EPS estimate is 65% above consensus.
• 2027 EPS versus consensus+38%The report says the 2027 EPS estimate is 38% above consensus.
• Q2 NAND pricing assumption+50% q/qThe report significantly raises the Q2 pricing assumption from the previous roughly +10% q/q.
• Q2 volume assumption+10% q/qThe report expects Q2 volumes to grow 10% q/q.
• Q2 gross margin assumption78.4%The report says overall gross margin was raised from 72.7% previously to 78.4%.
• Base-case valuation assumption23x through-cycle EPS of $48Used to derive the $1,100 price target.
• Bull case$1,500Based on 25x through-cycle EPS of $60.
• Bear case$600Based on 20x through-cycle EPS of $30.

Impact & implications

The report has positive investment implications for SanDisk: near-term earnings reactions may be uncertain due to elevated expectations, but medium-term earnings upgrades, constrained NAND supply, AI-related demand, and prepayments under long-term agreements may continue to support valuation. For the storage sector, the report reinforces the narrative that NAND is moving from cyclical recovery toward AI-driven structural demand, while also signaling that DRAM still holds a stronger position in the AI bottleneck.

Risks

• NAND industry growth falls short of expectations.
• Industry participants increase capex again to compete for share, causing supply pressure to rebound.
• SanDisk fails to gain enough traction in the data center SSD market and loses market share.
• Chinese manufacturers continue to gain share, putting pressure on pricing and the competitive landscape.
• Long-term agreement negotiations or customer prepayments materialize more slowly than expected, weakening market confidence in durable demand.
• The share price has already risen sharply in the short term, and the post-earnings reaction may be constrained by high expectations.

What to watch

• Whether actual Q1 NAND pricing, volumes, and gross margin in this week's earnings exceed guidance.
• Whether pricing, volume, and cost-decline assumptions in Q2 guidance are close to Morgan Stanley's expectations.
• Whether long-term agreements, customer prepayments, and multi-year shipment arrangements are reflected on the 2026 balance sheet.
• Whether Sandisk's capex over the next 12 months grows 40-50% as the report expects.
• Whether data center SSD and eSSD penetration continues to accelerate.
• Whether industry NAND WFE investment remains at historically low levels, confirming that supply will not quickly catch up with demand.
• Whether substantially better-than-expected cash flow leads to meaningful buybacks or capital returns.