Why Sandisk Stock Keeps Going Up

Sandisk (NASDAQ: SNDK) stock soared on Friday, gaining more than 8% after beating Wall Street earnings goals with a stick -- and the hits keep coming.

Shares of the popular computer memory-maker are up another 5.3% through 9:50 a.m. ET Monday morning -- Sandisk's fourth straight day of gains -- and investors can thank Wall Street for today's run.

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In back-to-back reports, first Montclair, NJ-based stock research firm Fox Advisors raised its price target on Sandisk to $1,500 a share. No sooner had it done so, reports TheFly.com, than analysts at Bernstein predicted Sandisk will go to $1,700!

As Bernstein explains in its note, Sandisk reported "strong" earnings for last quarter -- $23.03 per share in GAAP profit on sales that nearly doubled year over year to $6 billion. Pricing for Sandisk's NAND flash memory products is "very strong," helping the company to raise its guidance and convincing Bernstein to raise its own estimates of what Sandisk will earn this year.

Semiconductor sales have historically been cyclical. High prices (like today) attract competition and convince producers (Sandisk included) to increase capacity and production, growing supply and driving prices lower in the future -- at which point the up cycle ends and the down cycle begins.

Bernstein isn't predicting this time will be different, but rather arguing that the current up-cycle is so strong that prices will boost Sandisk profits enormously in the short-term, enough so that it's confident in predicting Sandisk shares will rise another 39% or more over the next 12 months.

Even after the gains Sandisk enjoyed last week, the stock still trades for about 40 times trailing earnings. 35% growth could be fast enough to support that valuation -- like Bernstein says, at least in the short term.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Why Sandisk Stock Keeps Going Up was originally published by The Motley Fool