TMTB Morning Wrap: Sandisk (SNDK), DASH HUBS APP DDOG U Recaps & the Usual
Good morning. QQQs -55bps as Tech had a disappointing earnings night which offered investors plenty of ways to lose money. SNDK -10% & WDC -14% missed in semis; DDOG -18% lower after missing Q3 bogeys; HUBS -23% with signs the AI disruption is real & FIG -15% likely help take down some of the recent app sw rally; APP -18% with a very disappointing print; only some internet names DASH +4% EXPE +2% and EBAY +1% were spared with slightly better #s although Z -12%.
The last few days have dinged some AI favorite names which now look range bound near-term: WDC, SNDK, ALAB, AMD among others. Despite the LT bull cases remaining intact, this earnings season has seen a lot more dispersion and smaller beats than the early Agentic AI takeoff in Q1 where #s and commentary were gangbusters So where is one to look when your favorite AI semi mo names are slip-sliding sideways (or down?)…
In early action, software -3% leading the way lower while Semis 0.5% as NVDA +1% helping prop up the space. App sw names down 4-5% on the back of HUBS and FIG disappointing prints. Some hyperscalers like AMZN/META helping prop up the QQQs as well as AAPL +1%
Asian saw mixed price action - NKY -0.9%, Hang Seng -1.4%, SHCOMP +0.5%, TAIEX -0.4%, KOSPI -4.5%, India +0.2%. . Memory names were off the most ( Kioxia-10%, Hynix-7%, Samsung-5%)
We’ll cover SNDK DASH HUBS APP DDOG U Recaps then move onto the usual…
Let’s get to it…
SNDK -10%: Missed both FQ4 and FQ1 rev bogeys, 5 additional NBMs & $90B in RPO, narrative & debate shifts to multiple expansion/valuation vs. EPS revisions.
Pretty disappointing results, as Q4 and Q1 both undershot bogeys by a wide margin, although there was a lot of debate going in over whether those bogeys adequately captured the consumer weakness many expected.
Bears will point to the softer margin guide as a sign of peak margins, especially in light of the CEO’s comments that they have “reached cruising speed” and that mid-80s GPM is a “fair return.”
Bulls will point to valuation. Run-rating flat ASPs after one 15% increase, along with flat bit growth through 2027, gets you to $230–$250 in EPS as a very conservative case. At $1,200, the stock is trading at roughly 5x that #. Another way to frame it: $90B in RPO gets you to a $90 EPS run rate EPS and stock trading at 15x that “floor” EPS. Bulls will also argue that NAND is becoming more strategically important, that better visibility and durability should mean a higher multiple, and that buybacks are ramping. They will also point to NAND checks getting better near term. For example, MS says that despite some pushback in pricing negotiations last month, that has reversed in recent weeks, with more positive momentum for TLC and QLC, as well as LTAs. There are also some signs of spot pricing beginning to tick up again.
Ultimately, the narrative for memory stocks is a lot harder than it was at the beginning of the year, when you had both an emerging, sexy secular story (KV cache offload, HBF, and the strategic importance of memory) being fueled by powerful cyclical tailwinds from pricing increases. That secular + cyclical combination is something we love, and it was an A+ setup for us.
Now, the bull case leads with valuation, as the second derivative of pricing has rolled over and the beats are getting smaller (or were nonexistent this quarter.)
Isn’t the cyclical merry-go-round fun? There has clearly been a lot of thesis creep among memory bulls, us included, and we have to be honest about where we are in the cycle.
So where do we shake out?