SanDisk stock has remained under pressure in the past few days and is now sitting at a crucial support level. SNDK dropped to $1,720, a few points below the important resistance level of $1,893. It has formed a highly bullish ascending triangle pattern, pointing to more gains in the coming days or weeks.
SanDisk stock has formed a highly bullish chart pattern
The daily chart shows that SNDK stock has rebounded in the past few months, rising from $993 in July to the current $1,720. A closer look shows that it has formed an ascending triangle pattern, which is made up of a horizontal resistance and an ascending trendline. It has now slipped to the lower side of this pattern.
An ascending triangle is one of the most common bullish continuation signs in technical analysis. In most cases, a bullish breakout tends to be strong bullish breakout whenever it nears the confluence line.
The stock has moved above the Supertrend indicator. It has also remained above the 50-day Exponential Moving Average (EMA), a sign that bulls are in control for now. Also, the Relative Strength Index (RSI) and the MACD have continued rising.
Therefore, the path of least resistance is bullish, with the next target to watch being the psychological level of $2,000. A move above that level will point to more gains, potentially to $2,355, its highest point this year, which is about 37% above the current level.
The bullish outlook will become invalid if the stock drops below the ascending trendline. Such a move will point to more downside, potentially to the support of $1,500.
SanDisk has become a bargain
Companies in the memory space have become some of the cheapest despite their strong revenue and profitability growth. For example, Micron Technology has a forward price-to-earnings ratio of 8, much lower than the S&P 500 Index’s 19.
This cheap valuation is notable because it is one of the fastest-growing companies in the US. In a report released last week, the company said that its revenue jumped to over $54 billion in the fiscal fourth quarter, while its gross margin rising to 86%.
The same is true with SanDisk, one of the top players in the memory industry. SanDisk has a forward PE ratio of 8, also lower than the technology sector average of 23. It is also much lower than other companies that are not growing as fast.
These numbers explain why many analysts tracking the company have a bullish outlook. Rosenblatt has a target of $2,400, while Mizuho targets $1,875. Wedbush’s Matt Bryson has maintained a target of $2,000. JPMorgan targets $2,250, while Evercore has a target of $2,800.
The cheap valuation is likely because investors remember the past boom-and-bust cycles in the memory space. For example, all companies in the space experienced a deep revenue dive in 2023 as the pandemic boom stalled.
SanDisk’s management knows this and has announced a strategy to prevent the cycle from repeating. It has entered into long-term contracts with some of the biggest companies in the industry, setting future floor and ceiling prices.
The company is also expected to continue growing in the foreseeable future, with the annual revenue expected to jump by 141% to $48.9 billion. It is expected to make over $58 billion next year, and chances are that its real figures will be much higher.