SanDisk Stock Drop & $20M Bet — Full Breakdown & Transcript

[00:06] SanDisk after its earnings report. Welcome back to Signal vs. Noise where activity on the tape and ask what the market is saying beneath the move. market is saying beneath the move. Today's ticker is SanDisk, SNDK, after a

[00:18] record quarter. And yet the stock price is still down. On Wednesday, August 5th, we did see SanDisk come in with its earnings report. Revenues were higher at 8.97 billion versus 8.39 billion expected, up 372%

[00:31] year-over-year. The EPS was $39.29 versus $34.25. Gross margin was 84.6% versus roughly 80% expected. Their data center revenue nearly doubled. Edge rose 48%. Consumer though fell by 32%. Overall, this

[00:47] revenue picture gives you a shape of up 20.25 billion. That's a 175 point gain over the past year with 11.43 billion in net income. All those sound like great numbers. The stock still dropped 11% out of the gate.

[01:01] here today after that initial drop lower. But the reason why it dropped perhaps was that guidance. Their Q1 revenue guidance came in at 10.3 to 10.8 billion, which was giving a midpoint of 10.55. The buy-side expectation going in

[01:17] was about 11.1 billion. And the EPS guidance was for 44 to 46 versus 41 45 expected. So, earnings were actually above consensus, but the market is after that, we do see that there's a large options trade coming in saying

[01:32] worried about. The main position that hit the tape was the January 15th, 2027 hit the tape was the January 15th, 2027 1880 call. 162 days to expiration, 43%

[01:44] out of the money. Premium spent 19.6 million. Implied volatility 105%, which gives you a break-even price of $2,076 here on the position. Now, at the time around $1,317. So, the buyer from there needed roughly

[01:59] the position. Of the analyst targets issued after earnings, only Citigroup's or Citibank, I should say, 2,100 target sits above that level. There was a smaller trade that hit the tape, the August 14th 1750

[02:13] call, which is 8 days to expiration, 33% of the money. This is a paltry $264,000 in premium spent. The implied volatility was 122%, which leaves you with a break-even price of 1755 here. So, maybe between these two trades we can take a

[02:28] simple structure away. The August call is a short-term rebound bet after the report. The January call is a larger position and carries most of the risk and most of the conviction, of course. But, the question is why size up this

[02:42] But, the question is why size up this far away, 162 days after this recent sell-off here? One reason may be because of how Santos has been guiding versus delivering. In Q3 fiscal 2026, it guided for 4.6 billion and delivered 5.95

[02:57] billion, a 29% beat. In Q4, it guided 8 billion and delivered 8.97 billion, a 12% beat. You know, if that pattern were to continue repeating, applying a similar beat to the current Q1 midpoint would imply revenue closer to 11.8 to 12

[03:10] billion dollars, above the current buy-side expectation. It's almost Jack Welchian in a way. Beat, guide lower. Beat, guide lower. reaction for your stock over the long haul. But, I suppose this is one of

[03:24] January position right now, that the guide is conservative relative to how the company's actually been executing on their business. The street reaction to more mixed, and it was mostly negative on the targets. We see City cut to 2,100

[03:38] from 2,500, and it stayed at a buy. Mizuho actually cut to 1,900 from 2,200 and stayed at outperform. Jefferies cut to 1,750 from 3,000, but stayed at buy. Wells Fargo down to 1,400, RBC to 1,300. Susquehanna has a 3,050 target

[03:54] after the earnings report. So, this does give you a very wide range of outcomes anticipating the stock to perform between 1,300 and 3,050 well in advance

[04:06] of that investor day on August 13th. The committed revenue base is quite large Minimum committed revenue is 93.9 billion about 4.6 times last year's sales. Roughly half of their fiscal 2027 output is already covered in about 2/3

[04:20] of 2028. The company's added five long-term agreements since April it's also expanded its buyback authorization by 14 billion leaving about 15.5 billion remaining here. So, the setup into this investor day that's

[04:34] coming up around the corner for Sandisk seems to be straightforward here. If their long-term agreements, the pricing floors, and the supply constraints that are heading into the next calendar year, then the January call has plenty of room

[04:47] help start getting it there. But if the guidance or commentary shifts more premium paid on some of these longer dated positions does become a little bit run. Thankfully, there's 162 days here so a lot can change during that window.

[05:03] strong quarter perhaps with a market misunderstanding of where the company may be headed. This trader certainly thinks that the management team's been guiding a little bit more conservatively here only to beat around the corner and

[05:16] ultimately give you a reason to keep trading the stock to the upside. I'm curious what you think the signal versus noise though in the chat here. Is this a stock that's been basically cut in half from its highs earlier this year,

[05:29] or is this a signal? Someone's laying out a serious trade and they know something that the rest of us know here, which is to say that this AI infrastructure boom bust cycle is yet to be finished. Let us know below. This has

[05:42] Noise. You've of course been watching Tasty Live. Like and subscribe for more Tasty Live. Like and subscribe for more videos.