SanDisk Locks in 80% Gross Margin with Long-Term Agreements
SanDisk's long-term agreements (NBMs) have secured a significant portion of its planned shipments for FY27 and FY28, protecting its gross margin at around 80% even in pessimistic scenarios. The company's joint venture with Kioxia has also been extended to 2034, enabling efficient manufacturing capabilities and further bit growth at low capital intensity.
The NAND market is shifting towards long-term agreements, driven by data center demand, which is expected to continue growing due to AI inference. SanDisk's position in this cycle is strong, with a constrained industry supply landscape and a low capital intensity of around 5%. This supports the company's valuation, according to Goldman Sachs' report.
Goldman Sachs has maintained its Buy rating for SanDisk, with a target price of $2,200, representing a 26.6% upside potential from the current stock price of $1,738. The firm believes that the earnings stability provided by NBM, combined with the company's low capital intensity and constrained industry supply landscape, supports this valuation.