Samsung Electronics and SK hynix, Korea's leading semiconductor stocks, are extending a relentless rally around earnings season. As foreign investors scoop up the two stocks and drive prices higher, individual investors are taking advantage of the sharp index gains to lock in profits.
On the 28th, Samsung Electronics and SK hynix soared intraday to 164,000 won and 854,000 won, respectively, setting new all-time highs. Analysts say the buying frenzy toward the semiconductor duo has intensified as the strength of U.S. big tech corporations coincides with record-breaking earnings expectations.
From Jan. 2 to the 28th, shares of Samsung Electronics and SK hynix jumped 35% and 29%, respectively. In just the past week, from the 22nd to the 28th, foreign investors bought the two stocks in bulk—315.8 billion won and 249.0 billion won—bolstering the rally. Individuals were net sellers over the past week, unloading the two stocks by 85.2 billion won and 567.1 billion won, respectively, to take profits.
Despite the relentless upswing, brokerages are racing to raise their target prices for Samsung Electronics and SK hynix. SK Securities sharply hiked its target for Samsung Electronics to 260,000 won from 170,000 won, and for SK hynix to 1.5 million won from 1 million won. Compared with the Jan. 28 closing prices (Samsung Electronics 162,400 won, SK hynix 841,000 won), the analysis suggests an additional upside of 60% and 78%, respectively, an unusually bold call.
Just half a year ago, the market consensus targets stood at 76,333 won for Samsung Electronics and 334,167 won for SK hynix. Recently, however, they have shot up vertically to 169,846 won and 876,231 won, more than doubling expectations in six months.
This is seen as the result of expectations that, along with favorable semiconductor conditions, demand for high-performance memory will inevitably expand structurally amid investment in artificial intelligence (AI) servers and data centers.
Earnings also back up these unusually aggressive target prices.
Before the market opened that day, Samsung Electronics announced it posted revenue of 93.8374 trillion won and operating profit of 20.0737 trillion won in the fourth quarter of last year (October to December). It became the first domestic corporations to surpass 20 trillion won in quarterly operating profit. On an annual basis, revenue was about 333.6 trillion won and operating profit was about 43.6 trillion won.
SK hynix recorded fourth-quarter revenue of 32.8267 trillion won and operating profit of 19.1696 trillion won last year, achieving its highest-ever quarterly results. Annual revenue came to 97.1466 trillion won, and operating profit was around 47 trillion won, surpassing Samsung Electronics.
Han Dong-hee, an SK Securities researcher, said, "The memory industry is expected to shift to a structure of 'order first, expansion later' based on long-term supply contracts," and noted, "With shortages aligning across all product lines, including HBM3E (fifth-generation high bandwidth memory), HBM4E (seventh-generation HBM), commodity DRAM, and solid-state drives (SSD), supplier corporations will begin maximizing profits and pursuing stable growth by optimizing the share of long-term supply contracts."
However, given that shares have surged in a short period on expectations of a memory upcycle, profit-taking could flood in right after earnings releases and increase volatility. Experts said the process of digesting supply near historic highs could continue for the time being.
Lee Min-hee, a BNK Investment & Securities researcher, said, "As capacity additions remain focused on HBM and there is strong demand for server memory restocking, the memory shortage is likely to persist at least through the first half of this year," adding, "Despite near-term valuation pressure after the sharp run-up, further gains are expected."