Analysts from securities firms in Yeouido have drastically lowered their earnings forecasts for Samsung Electronics next year. In just one month, it is common to see operating profit estimates cut by several trillion won. Some voices are raised questioning whether such negative forecasts are being reflected all at once, but those on the ground argue that it is justified. They analyze that as foreign competitors launch price-cutting offensives, the demand for finished goods that incorporate semiconductors will decrease once the U.S. Trump administration enters its second term with higher tariffs. The stock price is already being preemptively reflected. Samsung Electronics’ stock price, which rose to 80,000 won this year, is currently hovering around the 50,000 won range.
According to the financial investment industry on the 20th, all eight securities firms that provided their earnings outlook for Samsung Electronics next year have significantly revised their operating profit estimates downward compared to previous reports published one to two months ago.
The firm that made the most significant cut is NH Investment & Securities. Just on the 1st of last month, NH Investment & Securities estimated that Samsung Electronics would record an operating profit of 46.33 trillion won, but revised it to 35.145 trillion won on the 11th of this month. This marks a reduction of over 10 trillion won in just over a month.
Other securities firms are similarly adjusting their estimates. Daol Investment & Securities revised its estimate from 48.978 trillion won to 38.781 trillion won, which is on par with NH Investment & Securities. Even firms that reduced their profit estimates less than others still cut at least 2 trillion won. Firms such as Yuanta Securities reduced their estimates from 46.864 trillion won to 37.911 trillion won, BNK Investment & Securities from 40.396 trillion won to 34.219 trillion won, IBK Investment & Securities from 40.539 trillion won to 35.459 trillion won, Eugene Investment & Securities from 39.973 trillion won to 36.180 trillion won, and Kiwoom Securities from 42.068 trillion won to 39.476 trillion won.
The pessimistic outlook from securities firms regarding Samsung Electronics stems from Chinese companies that are flooding the market with products at half the price of their competitors. The Chinese memory companies ChangXin Memory Technologies (CXMT) and Fujian Jinhua Integrated Circuit (JHICC) are selling semiconductors at lower prices, putting Samsung Electronics at a disadvantage in terms of price competitiveness. The supply price for DRAM set by CXMT and JHICC is a minimum of $0.75, which is about one-third of the market price of $2.10.
Compounding the situation is weak demand. While demand for memory semiconductors for artificial intelligence (AI) remains high, demand for general-purpose products, which are essentially Samsung Electronics’ stronghold, is slowing.
Ryu Yeong-ho, a researcher at NH Investment & Securities, noted, "The recent strength in demand for low-cost products underscores the increasing influence of CXMT, and Samsung Electronics' stock price reflects significant concerns about technological competitiveness and worries about China's pursuit, trading at a price-to-book ratio (PBR) of around 1.0." The PBR was 1.69 when Samsung Electronics' stock price hit its peak of 87,800 won last July.
Daol Investment & Securities, which has lowered its earnings forecast by over 10 trillion won, believes that Samsung Electronics will have no choice but to cut the prices of its DRAM and NAND products in line with market trends. Ko Young-min, a researcher at Daol Investment & Securities, stated, "The adjustment of Samsung Electronics' operating profit is due to a downward revision of the average selling prices (ASP) for DRAM and NAND, as demand is weak in mobile and display sectors, and overall performance momentum is weak."
Noh Geun-chang, a researcher at Hyundai Motor Securities, said, "Compared to competitors, Samsung Electronics has a lower proportion and profitability in high-bandwidth memory (HBM), which will weaken its defenses against declines in prices of general-purpose memory semiconductors. (Due to the possibility of a tariff increase in the U.S.) the finished goods business will likely see limited profit growth from the decline in prices of general-purpose memory semiconductors."
Given the situation, the stock price seems to be struggling to rise. On the 14th of last month, it recorded 49,900 won, marking the first time in 4 years and 5 months that it fell to '40,000 Electronics.' As the stock price dropped, seven domestic exchange-traded funds (ETFs) also removed Samsung Electronics from their portfolios. The current price has slightly risen compared to that. On the previous day, Samsung Electronics closed at 53,100 won, down 3.28% from the previous day.
However, analysts in the securities industry believe that the current stock price of Samsung Electronics is in an oversold phase, even as they lower the operating profit forecasts. BNK Investment & Securities, which set the lowest target stock price for Samsung Electronics, currently has its price target at 72,000 won. In addition, Kiwoom Securities and Hanwha Investment & Securities are both at 73,000 won, NH Investment & Securities at 75,000 won, Daol Investment & Securities and Eugene Investment & Securities at 77,000 won, IBK Investment & Securities at 82,000 won, and Yuanta Securities at 85,000 won.
From Samsung Electronics' perspective, the potential for the U.S. Trump administration to sanction CXMT to counter China is a favorable development. Park Yoo-ak, a researcher at Kiwoom Securities, stated, "There is a possibility that CXMT may be added to the U.S. entity list to contain the rapidly rising AI alliance of Huawei and SMIC (China's top foundry company)." If that were to happen, sentiment toward investment in the DRAM industry could quickly improve, leading to an increase in the stock multiple of Samsung Electronics.
Kim Kwang-jin, a researcher at Hanwha Investment & Securities, mentioned, "Samsung Electronics is conducting a stock buyback of 10 trillion won, which has stabilized the downside, but there is a need for time before a full rebound in stock prices can be confirmed, as there is no newly confirmed competitive edge in the AI market."