“4th Quarter Performance Slump Expected… Semiconductor Inventory Adjustments Likely to Continue”
The outlook for Samsung Electronics’ stock rebound, which slipped last year due to memory semiconductor inventory adjustments, appears challenging in the new year. From the first trading day of the new year, securities firms have lowered their target prices for Samsung Electronics. However, as Samsung’s stock price is near the bottom, further declines are expected to be limited.
According to the Korea Exchange on the 2nd, Samsung Electronics closed at 53,400 KRW on the KOSPI market, up 200 KRW (0.38%) from the previous trading day. Throughout the last year, Samsung Electronics fell by 32.23%, and although it started the new year with a downturn, it closed slightly up due to net purchases by individual investors at the end of the day. Individual investors bought 79.9 billion KRW worth of Samsung Electronics on that day.
Reports lowering Samsung Electronics’ target price continued to roll in from securities firms. Out of 16 reports on Samsung Electronics published in the last month, 13 lowered their target prices. The average target price of Samsung Electronics dropped from 82,938 KRW to 76,500 KRW in just a month.
KB Securities set the lowest target price, reducing it from 80,000 KRW to 70,000 KRW. Meanwhile, 12 other securities firms set their targets in the 70,000 KRW range, with Yuanta Securities offering the highest target price of 85,000 KRW.
Securities firms anticipate that Samsung Electronics’ fourth-quarter performance will fall short of market expectations. They analyzed that demand for conventional memory was lower than expected, primarily due to renewed inventory adjustments among mobile and PC clients, without the anticipated foreign exchange benefits.
Chae Min-sook, a researcher at Korea Investment & Securities, projected that Samsung Electronics’ 4th quarter estimates would underperform the consensus figures, predicting a sales revenue of 74.5 trillion KRW and operating profit of 7.3 trillion KRW, which would be 4% and 18% below the consensus revenue of 77.9 trillion KRW and operating profit of 8.9 trillion KRW, respectively.
Eugene Investment & Securities expected Samsung’s 4th-quarter sales to be 76.3 trillion KRW with an operating profit of 7.9 trillion KRW. Lee Seung-woo, a researcher at the firm, noted that semiconductor inventory adjustments would continue due to weak demand for smartphones and PCs and geopolitical uncertainties from the inauguration of the Trump administration, expecting a negative growth rate in shipments and continued deficits in the non-memory division.
The inventory adjustment, which was a primary cause of Samsung’s stock price drop last year, is expected to continue this year. Chae noted that IT hardware set demand would remain in the mid-single digits compared to the previous year, and the risk of average selling price (ASP) declines due to oversupply would negatively impact conventional memory more, emphasizing the importance of supply adjustment for profitability in Samsung’s business structure, which has a relatively high proportion of conventional memory.
However, there are predictions that inventory adjustments will conclude in the latter half of the year, and Samsung Electronics’ stock price will begin to move. Lee Jong-uk, a researcher from Samsung Securities, stated that inventory adjustments would persist through the first half of the year, but once client inventories begin to decrease, the impact on stock prices will quickly subside. He noted that although a strong rebound trigger is not visible yet, stock prices have started to respond sensitively to positive news and less to negative news.
Kim Young-geon, a researcher at Mirae Asset Securities, also noted that Samsung Electronics’ valuation is the lowest compared to its global peers, suggesting it is a good time to buy if memory prices stop declining in the second half of the year, forecasting the peak of price decrease around May.