FILE PHOTO: Figurines with computers and smartphones are seen in front of the words "Artificial Intelligence AI" in this illustration taken, February 19, 2024. REUTERS/Dado Ruvic/Illustration/File Photo
Jan 30 (Reuters) - Sandisk shares rallied on Friday, after the data storage firm projected third-quarter profit and revenue well above analysts' estimates and extended a major supply deal, powered by a surge in AI-driven demand for data storage.
Its shares were last up 14.7% at $616.5, building on their roughly 160% jump in January that has made it one of the best-performing stocks on the S&P 500.
The company forecast fiscal third-quarter revenue to be between $4.4 billion and $4.8 billion, and adjusted profit in the range of $12-$14 per share. The midpoints of both were above the estimated $2.77 billion and $4.37 per share, respectively, according to data compiled by LSEG.
"Earnings are above the long-term trend, but based on our data points it seems likely to stay that way for more than one year - really for as long as the AI trajectory remains this robust," Morgan Stanley analysts said in a note.
Rivals Western Digital, Seagate Technology and industry giant Micron Technology have also posted robust gains of late, with memory chip makers emerging among the winners in the AI race so far.
Western Digital also forecast third-quarter revenue ahead of expectations, though its shares were down 5.5%.
With memory chips facing an acute shortage worldwide, AI and consumer-electronics companies are competing for dwindling supplies, a squeeze that is expected to support a multi-year backlog for manufacturers.
Morningstar analysts expect supply constraints to endure until at least 2028, which could generate significant growth for Sandisk.
The company reported sales of $3.03 billion and adjusted profit of $6.2 per share for the second quarter, both surpassing the estimates.
Sandisk secured its flash chip supply through a joint venture with Kioxia Corp in Japan and the companies said they have extended their supply agreement through the end of 2034, from its previous expiration at the end of 2029.
At least five brokerages raised their price targets on the stock, with Bernstein's call of $1,000 among the highest on Wall Street.
(Reporting by Shashwat Chauhan in Bengaluru; Editing by Shilpi Majumdar)
