Wall St Engine (@wallstengine)

Barclays Upgrades $SNDK to Overweight, Raises PT to $2,300 from $1,200 Analyst comments: "Sandisk has been the most aggressive and structurally innovative in its contracting approach. Its New Business Models, or NBMs, discussed at the most recent earnings, are said to provide the company with demand certainty and customers with supply assurance. The contracts vary in length, with the longest reaching into 2031, and are based on quarterly volume commitments that increase during the life of the contract, with a combination of fixed pricing in the short term and variable pricing in the long term. Variable pricing allows the company to capture upside if prices increase. The three contracts signed in the most recent quarter provide minimum contractual revenue of ~$42B. Each contract is secured with financial guarantees that, in total, among the five contracts already signed, exceed $11B. Of the >$11B, there is a portion that is in prepayments; SNDK recognized $400M in prepayment on the balance sheet in FQ3, and the remaining is made up of financial instruments that are managed by third-party institutions, which are triggered and delivered to SNDK if there is a breach in contract. These are the most desired contract types in the ecosystem today, giving customers supply visibility and SNDK guaranteed revenue and more confidence in their market outlook. We think this type of contract fundamentally changes the way memory players can decide and allocate business, making their environment much more secure and protected on the downside."