Revisiting the valuation of SanDisk and Micron Technology!

$Sandisk(SNDK.US)$Micron Tech(MU.US)

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Today I read an article about tech stock valuations, which made me think about how the market currently values and will value memory chip stocks in the future? Especially SanDisk and Micron Technology, these two US-listed domestic memory chip stocks, which also have geographical advantages.

The target price given by Morgan Stanley is based on the earnings valuation for the 2025-2026 fiscal year, giving about a 28x P/E ratio, while the valuations for other AI industry chain stocks are based on forward earnings for 2027 or the next few years. Ultimately, it's still treating memory chips as cyclical stocks, using a bait-and-switch tactic to deceive, saying they gave a 28x P/E ratio for a tech growth stock! Hahaha😂😂😂

This is the conflict with my view, as I have been firmly recommending SanDisk and Micron Technology in over 100 posts since the end of last year. They are all indispensable key components of the AI infrastructure industry chain. Just because they were cyclical stocks before, does every hundred dollars they earn become smaller than the hundred dollars earned by other industries?! The answer is obviously no. The money they earn is honorable, dollars are the same size, there's nothing despicable!

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The major memory chip giants are all IDM vertically integrated model enterprises, inherently superior to companies in the optical industry chain, power industry chain, and materials/equipment sectors. Memory chip companies have complete production systems and market pricing power, and are not dependent on any single customer, including NVIDIA and Apple. AI infrastructure demand is just the current major client. In the future, massive data and physical AI will require massive storage. Memory chip demand won't slow down because of a future slowdown in AI infrastructure growth; it might even accelerate. This is the future path for memory chips. That's why I've been saying the logic for memory chips has changed in the AI era; we can't look at the future with past perspectives.

Back to the valuation issue. According to Morgan Stanley's valuation logic, in another half a year it will be year-end. SanDisk and Micron Technology will release two more quarterly reports, and we'll have three quarterly reports plus an outlook for the 2026 calendar year's performance. We can then more accurately calculate their 2026 calendar year EPS. I estimate SanDisk's EPS to be between $150-200. Morgan Stanley gives it a 28x P/E ratio for that year, resulting in a discriminatory stock price between $4200-5600.

I firmly believe the market will eventually correct this cyclical valuation. In stock market terms, it's called a Davis double play. Any correction at any time is extra profit. This is also the reason why I repeatedly say that holding SanDisk and Micron Technology for the medium to long term lets me sleep soundly.