SanDisk: Supply Deals Redefine Future Value

SanDisk's current stock price trades at an attractive forward multiple of around 7.6 times earnings for fiscal 2028, significantly compressed from its trailing multiple. However, this cheapness is not the core investment thesis. The company is actively restructuring its business model by entering into multiyear supply agreements, some extending up to five years.

These new agreements guarantee a minimum of $93.9 billion in expected revenue, with floor pricing structures. Management has already committed over half of fiscal 2027 supply and roughly two-thirds of fiscal 2028 supply, supported by $16.5 billion in financial guarantees. This commitment to future revenue represents a shift toward sustainable growth, a key indicator of quality businesses.

Recent performance highlights this shift, with Datacenter revenue surging 103% in fiscal Q4 2026 due to demand for high-capacity enterprise SSDs crucial for AI inference. Conversely, Consumer revenue declined 32% in the same quarter, underscoring SanDisk's strategic pivot.