Sandisk: Reduced Cyclicality And A Forward FCF Yield Of 10% Bolster The Investment Case

The Alpha Sieve 5.17K Followers Follow Summary Sandisk, which has exploded by over 4700% since its debut, looks set to make a mockery of the large spin-off thesis. SNDK is priced like a cyclical stock at the end of an upturn, when it is on course to still see robust earnings growth and a healthier financial profile. In a CAPEX heavy environment for memory players, SNDK looks well placed to deliver relatively lower manufacturing costs per gigabyte. SNDK which already offers a superior trailing FCF yield to Micron and Kioxia, looks set to convert 50% of its sales to FCF, implying a 10% FCF yield in FY27. Key risks include growing inventory & working capital build coupled with intensifying competition from Chinese entities such as YMTC and CXMT. J Studios/DigitalVision via Getty Images Well On Course To Decimate The Spin-Off Thesis Large corporate spin-offs aren’t all they’re cracked up to be; a study by McKinsey released in Q1 this year showed that the majority of large spin-offs This article was written by The Alpha Sieve 5.17K Followers Follow Investment research, primarily oriented towards uncelebrated/under-covered stocks and ETFs, across North America, Latin America, Europe and Asia. Seeks to combine both fundamental and technical disciplines while making an investment/trading proposition. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.