With Samsung Electronics setting a new 1-year high recently, securities firms are raising their target prices one after another. The main reason is the outlook that the semiconductor cycle will remain favorable through 2026. Still, investors are skeptical because there have been many cases in the past where securities firms raised Samsung Electronics' target price only for the stock to turn downward.
As of the 17th, the average target price for Samsung Electronics from 34 institutions worldwide that issued targets stood at 83,720 won, according to S&P Global. That is up 14.4% from the average of 73,180 won two months ago. The increase reflects more securities firms raising their Samsung Electronics targets since Jul.
Many securities firms are also calling for "90,000-electronics." Hana Securities on the day raised its target price for Samsung Electronics to 95,000 won from 84,000 won. ▲ Mirae Asset Securities 96,000 won ▲ Korea Investment & Securities 95,000 won ▲ NH Investment & Securities 94,000 won ▲ KB Securities 90,000 won, and more securities firms in the past week have set Samsung Electronics' target price at 90,000 won or higher.
Foreign securities houses also have an optimistic outlook on Samsung Electronics' share price. HSBC raised its target price to 105,000 won the previous day, and Macquarie and CLSA lifted theirs to 95,000 won and 90,000 won, respectively.
The grounds for assigning a higher valuation to Samsung Electronics are broadly similar. As the artificial intelligence (AI) boom leads corporations to concentrate production capacity on high value-added memory, including high bandwidth memory (HBM), a shortage is emerging in general DRAM and NAND flash. With supply-demand tightening, prices are rising, and securities firms expect profitability at memory chipmakers, including Samsung Electronics, to improve. There is also anticipation that Samsung Electronics, which had struggled in the HBM market behind SK hynix and U.S. Micron Technology, could strike back starting with the next-generation product HBM4.
Kim Rok-ho, an analyst at Hana Securities, said, "Samsung Electronics' current share price is 1.2 times price-to-book ratio (PBR; market cap ÷ net assets), below the historical average of 1.4 times, and considering the memory upcycle, we judge that even 1.7 times, the midpoint between the upper bound and the average PBR, is not an onerous level."
Kim Dong-won, an analyst at KB Securities, also said, "Although Samsung Electronics' share price has risen more than 15% since Aug., considering the current PBR and the earnings turnaround (rebound), we believe there is ample room for further gains."
The fact that foreigners are buying Samsung Electronics intensively is also cited as a factor that could bolster the share price. Foreign ownership of Samsung Electronics stood at 51.02% as of the previous day, the highest level this year, but considering that it exceeded 56% when the stock surged in Jul. last year, there is roughly a 5 percentage-point cushion.
The problem is that in down cycles, securities firms' target prices tend to simply chase the actual share price. For example, the average target price for Samsung Electronics over the past five years was highest on Aug. 14 last year. This was a period when the stock plunged and then rebounded after the so-called "Black Friday and Monday." Contrary to securities firms' expectations, however, Samsung Electronics remained weak, and within three months the intraday share price fell to 49,900 won. Even then, the average target price was 86,550 won.
It was the same in Jan. 2021, when Samsung Electronics climbed to an all-time high of 96,800 won. At that time, securities firms' average target price for Samsung Electronics was 97,300 won, which was raised to 106,970 won about four months later. During the same period, the stock actually fell by about 14%.
Samsung Electronics shares traded at 77,800 won on the KOSPI market at 10:20 a.m. on the day. The price fell 2.02% (1,600 won) from the previous day. In addition to caution ahead of the U.S. Federal Open Market Committee (FOMC) results due early on the 18th Korea time, the decline is seen as reflecting comments by U.S. President Donald Trump that he could impose a higher tariff rate on imported semiconductors than on automobiles.