Micron and Sandisk Shares Are Crashing. Is It Time to Buy the Dip?
Being a Micron Technology (MU +1.93%) or Sandisk (SNDK +2.52%) shareholder was fantastic from Jan. 1 to June 30 this year. During that span, Micron’s stock rose 304%, while Sandisk’s rose 858%.
Many investors wait decades for returns like that, yet these two delivered those results in just six months. However, as soon as the calendar flipped to July, it has been all downhill from there.
Since then, Micro’s stock has plummeted 26%, while Sandisk is down 40%. That’s a rough change in sentiment for both groups of investors, but the question is: Is that sell-off warranted, or is the market just taking some gains?
Let’s take a look at these two and see if now is the right time to buy the dip.
Image source: Getty Images.
The constraint in the memory chip market is benefiting these two
Both Micron and Sandisk produce memory chips. Micron produces DRAM and NAND memory, while Sandisk only produces NAND, which retain data even after the power is shut off and are therefore great for long-term data storage.
In data centers, their most common use is in solid-state drives (SSDs), which are used in large quantities to store information. DRAM is high-speed memory and is used alongside computing units for quick access to data.
Today’s Change
(1.93%) $16.38
Current Price
$865.33
Key Data Points
Market Cap
Day’s Range
$858.77 – $900.94
52wk Range
$103.38 – $1255.00
Volume
1.3M
Avg Vol
51.8M
Gross Margin
72.60%
Dividend Yield
0.06%
Both of these types of memory are incredibly important in modern computing infrastructure. With unprecedented data center demand, nobody in the industry was prepared for how strong it would be. Right now, memory chips are essentially the biggest bottleneck in the AI building boom, which has caused their prices to skyrocket.
Sandisk and Micron are unbothered by this fact, as soaring chip prices mean increased revenue and profit for them. This trend is the reason these two skyrocketed during the past few months.
Now, with growing fears that AI computing capacity is being overbuilt, they have crashed. However, that fear is unfounded and refuted by comments from both companies.
Today’s Change
(2.52%) $34.21
Current Price
$1,389.03
Key Data Points
Market Cap
Day’s Range
$1375.63 – $1454.78
52wk Range
$40.10 – $2354.39
Volume
328.6K
Avg Vol
13.2M
Gross Margin
56.04%
During Micron’s most recent earnings announcement, management said that the “tightness” in the memory chip market will persist beyond 2027. That’s a great sign for the long-term viability of the AI building boom and suggests that these two stocks aren’t just smart short-term investments; they also have value over the long term, especially as the AI build-out ramps up.
I think this could be a great opportunity, with their current share prices making them excellent candidates to buy on the dip.
How high can they go?
Because the memory chip market is cyclical, Wall Street is always hesitant to fully value stocks in this sector. However, if it becomes clearer that memory demand will persist for several years, the market may be more inclined to give Micron and Sandisk their full valuation.
The S&P 500 trades at 21.5 times forward earnings, so I’ll use that as the bar to gauge where these two could be valued. They are trading far below that threshold and have major upside if they can rise to that level.
SNDK PE Ratio (Forward) data by YCharts; PE = price to earnings.
With forward earnings multiples of 11.6 (Micron) and 6.4 (Sandisk), these two stocks are cheap despite enjoying a generational opportunity. I think they have plenty of upside left, although investors may need to endure some sell-off pain during the next few months as the market looks for a bottom for them. The companies are growing into an unprecedented market, and that could result in more incredible gains during the next year and a half.
However, Micron Technology and Sandisk are not set-it-and-forget-it stocks. Investors must continue to monitor the memory chip market to ensure prices stay elevated. If they start to crash, these two will be right in the crosshairs of that trend.
