Why did the stock price plunge after the earnings release?

On August 5 after market close, two major U.S. memory giants—SanDisk and Western Digital—released their earnings simultaneously: ・SanDisk: Q4 revenue of $8.96 billion, up a staggering 372% year-on-year—far exceeding market expectations; approved a $14 billion share buyback. ・Western Digital: Revenue of $3.747 billion, up 44% year-on-year; net profit surged 12-fold—also significantly surpassing expectations. Yet SanDisk fell 7% after hours, and Western Digital plunged 11%. This is not the first time. In July, SK Hynix released its Q2 earnings—operating profit soared 18-fold year-on-year—but its stock crashed 30% intraday. The better the results, the sharper the drop. This is the 'magical realism' of the memory chip sector. Why? Because memory is a quintessential cyclical industry. Memory chip prices swing like a rollercoaster through distinct cycles: surging when supply falls short of demand—driving massive profits—and collapsing when oversupply triggers losses. A full cycle typically lasts 3–4 years. Cyclical stocks follow a pricing logic diametrically opposed to that of typical growth stocks: Stage Industry Condition Stock Price Performance Cycle Bottom Industry-wide losses, widespread pessimism Price quietly bottoms out and begins rising Early Upswing Earnings shift from loss to profit Price accelerates upward—largest gains occur here Mid Upswing Earnings sustain high growth, consistently beat expectations Price continues rising—but at a slower pace Peak of Prosperity Earnings hit record highs, but growth rate slows Price peaks and begins falling Early Downturn Earnings still rise—but growth decelerates Price plunges rapidly Late Downturn Industry-wide losses return Price hits bottom—awaiting next cycle The core rule in one sentence: Stock prices always lead earnings by 6–12 months. When earnings are strongest, that’s often precisely when the stock has peaked. Why? Because savvy investors quietly take profits just as 'everyone is bullish and earnings shine brightest'—they know that after the peak of the cycle comes the downturn. Where are SanDisk’s (and peers’) 'cracks'? Specifically for this memory cycle, markets are growing concerned about: 1. Slowing price-increase momentum: DRAM contract prices rose over 90% quarter-on-quarter in Q1, but are now expected to rise only 13%–18% in Q3—indicating a clear inflection point. 2. Weak consumer demand: While AI server demand remains robust, consumer electronics—including smartphones and PCs—have yet to fully rebound. A cycle propped up by just one pillar raises sustainability concerns. 3. Supply-side risks: Fueled by high profitability, Samsung and SK Hynix are ramping up capacity expansion—potentially increasing future supply. 4. Guidance below expectations: SanDisk’s revenue guidance for next quarter—midpoint $10.55 billion—fell short of the market’s $11.16 billion consensus. This was the final straw. Once the market senses 'the most profitable phase may already be over,' the stock will fall—even while earnings continue rising.

DuPont has acquired again—targeting the healthcare sector!

In August 2023, DuPont completed the acquisition of Spectrum Plastics Group for $1.75 billion. Spectrum’s business partially overlapped with Donatelle Plastics, focusing on specialty medical devices and components across structural heart disease, electrophysiology, surgical robotics, and cardiovascular applications. Donatelle Plastics, with nearly 60 years of history and over 400 employees, holds strong financial growth potential in areas including electrophysiology, drug delivery, diagnostics, cardiac rhythm management, neuromodulation, and orthopedics. This strategic acquisition aims to further expand DuPont’s footprint in the medical device market—signaling management’s strong confidence in the long-term growth trajectory of the healthcare sector and underscoring its high strategic priority for upstream medical device markets. DuPont intends to deepen its presence and pursue strategic transformation and expansion. By broadening its scope in medical devices, DuPont expects to strengthen its competitiveness in the healthcare market and challenge incumbent industry leaders. ▍A Century-Old Company Reclaiming Glory Over the past five years, DuPont has undergone two major spin-offs and multiple rounds of business restructuring to actively navigate global economic uncertainty and fragility. While divesting legacy businesses—including its Transportation & Materials segment—it has continuously strengthened its competitive advantages and product portfolios in medical materials, electronic materials, and water treatment. In Q1 2024, DuPont reported net sales of $2.9 billion and operating EBITDA (earnings before interest, taxes, depreciation, and amortization) of $682 million. Driven by sustained optimism regarding the recovery of the electronics market—and positive outlooks for industrial end-markets including water treatment and medical packaging—DuPont raised its full-year guidance for net sales, operating EBITDA, and adjusted EPS, forecasting sequential improvement in both sales and earnings. In May this year, DuPont announced its formal split into three independent, publicly traded companies: New DuPont (comprising the majority of its Industrial Solutions segment—including healthcare—its Water & Protection business, and remaining retained operations), Electronics, and Water. See related coverage: 'Doubling Down on Healthcare! Global Chemical Giant DuPont Splits Again.' New DuPont will serve global healthcare end-markets, offering products and services spanning biopharmaceutical consumables, medical devices, and medical packaging. New DuPont’s 2023 sales totaled approximately $6.6 billion, with an operating EBITDA margin of 24%, primarily distributed across healthcare, mobility, and safety & protection—including iconic brands such as Tyvek® and Kevlar®. In healthcare, key new offerings include the latest specification of Tyvek® Tyvek® medical packaging material—a high-density polyethylene fiber nonwoven technology—and Liveo® flexible skin-conductive tape, a silicone-based thermosetting adhesive designed for electrophysiological signal sensing and transmission. The spin-offs and restructuring are beginning to yield tangible results. In Q2 2024, the company reported net sales of $3.2 billion, up 2% year-on-year—or up 4% driven by acquisitions. Organic business was flat: volume grew 2%, offset entirely by a 2% price decline. Key financial metrics improved: EPS rose 14% year-on-year.

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