SanDisk (NASDAQ:SNDK) shares have plunged roughly 50% from their peak this year as the memory chip sector has come under intense selling pressure. The Roundhill Memory ETF (CBOE: DRAM), a benchmark for the industry, has also retreated about 40% from its year-to-date high.
Investors are now looking to the company’s upcoming earnings report for signs that the stock is ready to stage a recovery.
SanDisk Stock Falls Ahead of Earnings
SNDK stock continues its strong downward trend because of the ongoing weakness in the memory industry. Top companies like Micron, Samsung Electronics, SK Hynix, and Western Digital have all plunged from their all-time highs.
Focus among investors now shifts to the upcoming earnings, which will come out on Wednesday this week. Analysts expect these results to show that SanDisk’s revenue growth gained steam last quarter. The average estimate is that its revenue soared by 341% to $8.4 billion.
With the memory industry having more demand than supply, its profits are also expected to surge from $0.29 per share to $34.5. The annual revenue is expected to come in at $19 billion, up by 169% from what it made in the previous year.
Other memory companies have published strong numbers recently. Seagate Technologies (NASDAQ:STX) said that its revenue jumped to $3.63 billion, higher than the expected $3.49 billion. Japan’s Kioxia and South Korea’s SK Hynix and Samsung published strong numbers.
SanDisk’s business is benefiting from the recent multi-year deals that have put a floor and ceiling of its products. It has reached deals worth billions of dollars from companies like Meta Platforms and Apple.
The main concern in the industry is that, despite these deals, the memory industry will go through the booms and busts that have happened in the past decades. For example, the most notable cycle happened in 2023 when most of these companies reported a 50% decrease in their revenues.
Will SNDK Stock Jump or Fall After Earnings?
The SNDK stock price is expected to be highly volatile this week when it publishes its earnings this week. The options market has an implied volatility of 185%, higher than its historical volatility of 165%.
Its put/call volume ratio for the options expiring on Friday is 0.92, while the put/call open interest moved to 0.90.
Technicals show that the stock has formed a descending channel in the past few weeks. This channel formed after a strong surge, a sign that it is part of a bullish flag pattern.
The stock bottomed at the 200-day Exponential Moving Average, which is also slightly above the 50% Fibonacci Retracement level. Therefore, the stock may eventually bounce back, potentially to the psychological level of $1,500.
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