Why Is Sandisk Stock Down In Premarket Today?

• SanDisk stock continued the decline from Friday's session.
• SNDK has emerged as the market's top-watched stock after stupendous gains, leading analysts to double their price targets and investors to build short positions.
• Memory chip stocks are rallying broadly amid an ongoing supply shortage that is tightening the market.

SanDisk Corp.'s stock declined 1.5% in early premarket trading on Monday, continuing its retreat from the previous trading session, with a new report forecasting a potential short squeeze.

The memory device company, once known for its nifty thumb drives, has emerged as one of the most actively watched stocks, particularly among retail investors. Since the company spun off from Western Digital and started trading independently in February 2024, the stock has climbed a whopping 1,178%.

Last week, Wedbush more than doubled its price target on SanDisk's shares to $600 from $260, underscoring just how sharply the stock has blown past analysts' expectations.

On Friday, SNDK declined nearly 6% as some investors booked profits. That was the first of the last six sessions in which the stock ended in the red.

Meanwhile, short interest in SNDK has risen to 6%, the highest in nearly a year. S3 Partners, which tracks shorting activity, said in a recent report that the buildup in short positions could trigger a short squeeze.

A short squeeze occurs when a heavily shorted stock rallies, forcing short sellers to buy shares to cover their positions, which pushes the price even higher. 

The rally in SanDisk's shares has now pushed mark-to-market losses on short positions past $3 billion, driving S3's risk score to 82.5, a level the firm describes as "extreme."

SanDisk's gains come amid strong momentum across the memory-chip space, with top players flagging that supply could be tight this year amid surging demand from hyperscalers building new AI data centers. 

Western Digital shares are up by 37% year to date; Stocktwits recently published a concise explainer on how investors should view the memory industry's current upswing.

The retail sentiment for SNDK was 'bullish' as of early Monday, unchanged from the previous day.  

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