Sandisk beats estimates, guides higher and sets an eight-for-one stock split

The flash storage maker forecast second-quarter revenue of $12.2 billion to $12.6 billion after buying back $5.0 billion of its own shares in the quarter.

Sandisk beat first-quarter forecasts and guided above them, and in the same release set the date for an eight-for-one stock split. Earnings per share came in at $49.51, $2.36 better than expected, on revenue of $11.03 billion against the $10.85 billion forecast.

The forecast matters more than the quarter. Sandisk expects fiscal second-quarter revenue of $12.2 billion to $12.6 billion, with adjusted earnings per share of $55.00 to $57.00 on a pre-split basis. Both point to further growth, and that makes the data centre demand cited by David Goeckeler, the chairman and chief executive, look like more than a one-quarter event. He said robust and growing demand drove faster growth in that business as the company carries out the strategy it set at its Investor Day.

The split is therefore not a cosmetic move timed ahead of weak fundamentals. Shares will be issued after the market close on November 19, and post-split trading starts on November 20. A split changes the price of a share, not what the company is worth, so the results are what give it substance.

The buyback says the same thing. Sandisk repurchased about 3.2 million shares for $5.0 billion in the quarter, bringing purchases over two quarters to roughly 4% of shares outstanding. A company spending at that pace is telling investors it thinks its stock is undervalued, even after a run tied to demand for flash storage in data centres. That is a confident claim, and the guided range is the test of it.