Leveraged ETFs tied to SanDisk Corp. (SNDK) took a beating after the memory-chip maker's latest earnings report, serving as a stark reminder that even a blowout quarter can leave investors disappointed when expectations have run too far ahead.
The Leverage Shares 2X Long SNDK Daily ETF (SNDG) fell 10.8% on Wednesday and plunged more than 20% in Thursday's premarket session. The selloff was echoed by the T-REX 2X Long SNDK Daily Target ETF (SNDU) and the Tradr 2X Long SNDK Daily ETF (SNXX), both of which also dropped sharply as SanDisk shares extended their post-earnings decline.
The move marks a dramatic reversal for the ETFs, which remain highly sensitive to daily swings in the underlying stock.
Blockbuster Results, Disappointing Reaction
SanDisk delivered a strong fiscal fourth quarter, reporting adjusted earnings of $39.25 per share, nearly 14% above analysts' estimate of $34.45. Revenue surged to $8.97 billion, topping the consensus estimate of $8.39 billion and jumping from $1.9 billion a year earlier.
The company attributed the outperformance to higher pricing and a richer customer mix. Data center revenue soared 437% year over year.
Despite the headline beat, investors focused on the outlook. For the first quarter of fiscal 2027, SanDisk forecast revenue of $10.3 billion to $10.8 billion and adjusted earnings of $44 to $46 per share. While the earnings outlook exceeded consensus, the revenue guidance offered little upside after the stock's massive run, prompting investors to lock in gains.
Guidance, Margins Cloud the Outlook
Beyond the quarterly numbers, management's commentary added to the cautious mood.
CEO David Goeckeler said SanDisk expects mid-teens declines in PC and smartphone shipments this year as consumer electronics markets adjust. Although rising storage capacity per device is expected to cushion the impact and the company sees NAND demand returning to growth in 2027, the near-term outlook reinforced concerns about slowing end-market demand.
Analysts are also questioning whether the industry's exceptional profitability can last. Susquehanna's Mehdi Hosseini said investors are now focused on whether memory makers can sustain gross margins approaching 80% as AI spending shifts from model training to inference. While he believes inference could ultimately support NAND demand, margins remain the market's biggest question.
Adding to the mixed sentiment, Monetary Matters host Jack Farley described the results as a “giant beat” but called the first-quarter guidance “meh,” reflecting the market's view that expectations had become exceptionally high.
Leveraged ETFs Bear the Brunt
The steep decline in SNDG, SNDU and SNXX illustrates the double-edged nature of single-stock leveraged ETFs. Designed to deliver roughly twice the daily performance of SanDisk shares, these funds can generate outsized gains during rallies. However, they magnify losses when sentiment turns.
With SanDisk's AI-driven growth story still intact but investors reassessing the pace of future earnings and margin expansion, volatility in the stock has translated into even sharper swings for its leveraged ETFs. For traders betting on continued momentum in the memory sector, the latest rout is a reminder that in leveraged products, even an earnings beat isn't always enough when expectations are already priced for perfection.
