Sandisk Can Extend Strong Run on AI-Driven Demand, Morgan Stanley Says

Sandisk (SNDK) could extend its strong run as long as AI-driven demand remains robust, Morgan Stanley said in a Friday note.

"Earnings are above the long term trend, but based on our data points it seems likely to stay that way for more than one year - really for as long as the AI trajectory remains this robust," the report said.

The company is finalizing long-term agreements with different customers, notably with the big US hyperscalers, which are likely to result in upfront cash prepayments, the report said.

"Cash pre-payments could further strengthen an already transformed balance sheet, capital returns may be next," it said.

Sandisk could use the prepayments and expected $15 billion in free cash flow over the next five quarters to repurchase shares or invest in the business, the note said.

A buyback authorization of 15% to 20% of its market value is a "strong possibility" in the next 12 months, the report said.

Morgan Stanley raised its price target to $690 from $483 while keeping its overweight rating.

Price: 621.40, Change: +82.10, Percent Change: +15.22