Why Is Sandisk Stock Still Dropping?

Is Sandisk (SNDK -1.79%) stock overbought… and overpriced?

Worries over a Morgan Stanley report yesterday, which compared the percentage of the S&P 500 index that is Sandisk stock versus the percentage Sandisk occupies in the portfolios of large institutional investors — and concluded Sandisk is “over-owned” — spooked investors yesterday. By close of trading, Sandisk stock had fallen 9%.

As we approach the mid-day mark Wednesday, Sandisk stock continues to drift lower — down 2.2% as of 11:30 a.m. ET.

Image source: Getty Images.

Over-owned versus under-owned

Morgan Stanley’s number-crunchers did what they do, calculating percentages and concluding that certain tech stocks, including Apple, Microsoft, and Amazon, are all “under-owned” (because institutions don’t own as much of them as S&P does). Other stocks, and Sandisk in particular, are conversely “over-owned” — because they’re more popular on Wall Street.

But here’s the thing: Analysts surveyed by S&P Global Market Intelligence predict Apple will grow earnings at about 13% over the next five years, Microsoft at 16%, and Amazon at 21%. These are all respectable numbers, of course, but Sandisk is supposed to grow earnings at 40%.

That’s nearly twice the growth rate of the “under-owned” stocks.

Today’s Change

(-1.79%) $-29.15

Current Price

$1,596.63

Key Data Points

Market Cap

$241BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day’s Range

$1542.00 – $1699.00

52wk Range

$43.20 – $2354.39

See also  Social Security's Trump Bump-Driven 2027 COLA May Lead to a Silver Lining for the First Time Since 2023

Volume

11.1M

Avg Vol

13.8M

Gross Margin

71.47%

Why Sandisk is popular

Not only that, but applying its growth rate to its price-to-earnings ratio of only 24, Sandisk stock sports a PEG ratio (that’s its P/E divided by its long-term forecast growth rate) of just 0.6. That’s a 40% discount off the 1.0 ratio that many value investors would consider a fair price for a stock.

At this price, it makes sense that Wall Street wants to own a lot of Sandisk stock. At this price, and at this growth rate, I kind of want to own Sandisk, too.