Despite memory chip maker SanDisk delivering stellar quarterly earnings and issuing an upbeat outlook for the coming period, its stock took a nosedive of around 20% on Thursday. Prior to this, SanDisk had been a darling of the market, buoyed by its robust financial performance. Analysts had, at one stage, set target stock prices for the company ranging from $230 to $300.

The immediate trigger for the sell-off wasn't any negative news. On the contrary, its first-quarter revenue and earnings per share were impressive, and the guidance for the second quarter also surpassed market expectations. However, a combination of factors ate into its profit margins. Around $60 million in wafer fab start-up costs, coupled with $10 million to $15 million in underutilization fees, took a toll on profitability, causing the quarter's profit margins to fall short of expectations.

The heightened volatility in the NAND market further fueled investor jitters. Skyrocketing prices led to supply hoarding, and there was a cloud of uncertainty hanging over profit margins. Moreover, SanDisk's valuation had reached lofty heights. Before the plunge, its stock price was significantly higher than the target price set by analysts, and its price-to-earnings ratio was a staggering 765 times.

Analysts are divided in their views. Goldman Sachs posits that for the stock price to find its footing, two conditions need to be met: a reduction in wafer fab costs and stable NAND pricing. Failing that, the market correction could drag on for an extended period.

A final word of caution: the market is inherently risky, and investors should proceed with due diligence and prudence.