Missed Nvidia in 2009? This Rare Signal Is Flashing Again.\u00a0In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia.\u00a0For the first time in years, that same “Total Conviction” signal is flashing for a company 1\/100th the size of Nvidia.\u00a0Continue \u00bb<\/a> <\/p>\n Investors liked the answer. Shares jumped about 14% on Thursday and trade near $1,528 as of this writing. Even so, the stock would need to climb more than 50% to revisit its 52-week high of $2,354.39. <\/p>\n A company converting half its revenue into free cash would rank among the most profitable large businesses in the world. Whether investors can trust the targets is another matter. <\/p>\n The targets land differently once you set them beside what Sandisk just reported. A year ago, this business ran a 26.2% gross margin and roughly broke even. In the fiscal fourth quarter, revenue reached $8.97 billion, up 372% year over year, and gross margin hit 84.6%. <\/p>\n Fiscal 2026 as a whole (the fiscal year ended July 3, 2026) captured the shift. Revenue climbed 175% year over year to $20.25 billion, and net income totaled $11.43 billion, or $73.76 per share. Adjusted free cash flow<\/a> was $8.7 billion — about 43% of revenue, and a figure that already strips out roughly $2.5 billion of customer prepayments. <\/p>\n And management expects more in the near term. Its guidance puts fiscal first-quarter revenue between $10.3 billion and $10.8 billion, with non-GAAP earnings per share in a $44-to-$46 range. The fiscal fourth quarter came in at $39.25 on the same measure. <\/p>\n To me, the new model is less a forecast of change than a promise that the peak holds. Gross margins near 80% sit just below the fiscal fourth quarter’s level. Operating expenses stay around 5% of revenue. And cash conversion actually improves, from fiscal 2026’s 43% to about 50%. <\/p>\n Management also said it expects to return 100% of excess cash to shareholders after investing in the business, on top of the $15.5 billion buyback authorization already in place. <\/p>\n Half the bits are already committed <\/p>\n Whether any of this holds comes down to pricing, and pricing is where Sandisk’s answer got specific. The company has signed eight customers to New Business Model agreements, or NBMs — multiyear supply deals with committed volumes and structured pricing. Those deals cover about half of Sandisk’s expected bits in fiscal 2027 and about two-thirds in fiscal 2028. <\/p>\n Story Continues <\/p>\n “The total expected revenue from all our NBMs we have signed is a minimum of $93.9 billion, assuming floor pricing,” chief financial officer Luis Visoso said when the company reported fiscal fourth-quarter results on Aug. 5. The deals also carry financial guarantees (cash deposits and financial instruments totaling $16.5 billion). <\/p>\n For perspective, Sandisk produced $20.25 billion of revenue in its record fiscal 2026. The contracted minimum alone is worth more than four years of that. <\/p>\n Supply discipline points the same way. Sandisk grows supply “primarily through nodal transitions rather than wafer additions,” CEO David Goeckeler said on the same call, and those upgrades deliver bit growth in the mid-to-high teens. In other words, the growth in the model tracks bits the company can produce largely without adding wafer capacity — which is why capital spending stays small and cash conversion stays high. <\/p>\n Too good to last? <\/p>\n The market, of course, has its doubts. At the current price, shares fetch about 21 times fiscal 2026 earnings. Against the roughly $213 per share analysts forecast for fiscal 2027, the multiple falls to about 7. Pricing like that suggests investors expect earnings to fall well short of the model — a memory-cycle bust, not three more years at the peak. <\/p>\n The skepticism has history behind it. Memory pricing has moved in cycles, and today’s margins arrived with a price boom barely a year old. The floors protect pricing on the committed volumes, but about half of fiscal 2027 bits (and a third of fiscal 2028) will still sell at whatever the market pays. If pricing rolls over, the model’s margins could come down fast. <\/p>\n Still, I think Thursday moved the argument. A year ago, this business roughly broke even. Now a floor under about $94 billion of revenue is a matter of contract, with $16.5 billion of guarantees behind it, and management is committing to hand back whatever cash the business doesn’t need. The margin targets are the part Sandisk still has to earn, one quarter at a time. <\/p>\n Should you buy stock in Sandisk right now? <\/p>\n Before you buy stock in\u00a0Sandisk, consider this: <\/p>\n The Motley Fool\u00a0Stock Advisor\u00a0analyst team just identified what they believe are the\u00a010 best stocks<\/a>\u00a0for investors to buy now\u2026 and\u00a0Sandisk\u00a0wasn’t one of them.\u00a0The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. <\/p>\n Consider when\u00a0Netflix\u00a0made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation,\u00a0you’d have $421,943!*\u00a0Or\u00a0when\u00a0Nvidia\u00a0made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation,\u00a0you’d have $1,382,819!* <\/p>\n That performance is why people listen. With a track record of\u00a0beating the S&P 500 by nearly 5x,\u00a0Stock Advisor\u00a0offers a distinct advantage. Don’t miss the latest top 10 list, available with\u00a0Stock Advisor, and join an investing community built for the long haul. <\/p>\n See the 10 stocks \u00bb<\/a> <\/p>\n *Stock Advisor returns as of August 14, 2026. <\/p>\n Daniel Sparks<\/a> and his clients do not have positions 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<\/a>. <\/p>\n<\/a> Image source: Getty Images. Peak economics as the plan <\/p>\n