SanDisk Shares Fall; Technical Patterns Point to Further Drop

SanDisk shares fell to $1,565, more than 33% below this year’s peak, after several bearish chart patterns appeared on daily charts. A double-top formed near $1,805 and a rising wedge with converging upward trendlines have coincided with weakening momentum indicators.

The double-top pattern has a neckline around $1,415. A sustained move below that level would confirm the pattern and could result in additional selling pressure. A return above $1,805 would remove the double-top from current technical readings.

The rising wedge is defined by two ascending lines that draw together as price advances. Chart analysts view that formation as one that can precede a downside breakout when the lines converge. Short-term target levels cited by some technicians cluster near the $1,415 neckline; a breach at that point could trigger stop-loss orders.

Momentum measures are moving lower. The Relative Strength Index has dropped from overbought readings, and the MACD histogram has turned negative in recent sessions, indicating that momentum currently favors sellers.

On the fundamentals side, the company reported revenue of $9 billion for the June quarter, a 372% increase year over year. Analyst consensus projects annual revenue of about $48.9 billion for the current year and roughly $57 billion for the next fiscal year. Earnings-per-share estimates have been revised higher, to about $214 per share for this year from $70.80 in the prior year, and to about $264 per share for the following year.

SanDisk has negotiated long-term supply agreements with major customers that set floors and ceilings for prices. Management estimates, using conservative assumptions, that those contracts could support more than $90 billion in future revenue. The company’s forward price-to-earnings ratio is near 7.

Analysts have an average target price near $2,125. Firms including Citigroup, Susquehanna, Bank of America and Cantor Fitzgerald project higher share prices, citing revenue growth, improving margins and customer commitments.

Risks to the outlook include a slowdown in demand for memory used in artificial-intelligence systems, volatility in memory prices and broad shifts in technology markets. The identified technical patterns could contribute to sharp near-term price moves if selling intensifies.