Brokerages are raising their target prices for Samsung Electronics ahead of its earnings release on the 7th. While short-term results may dip slightly due to recognition of labor-management compensation expenses, analysts said attention should be on the recovery of high-bandwidth memory (HBM) competitiveness and improved long-term profitability.
Korea Investment & Securities Co. on the 3rd maintained a buy rating on Samsung Electronics and raised its target price to 590,000 won from 570,000 won. It said second-quarter results to be released on the 7th are expected to be in line with market consensus.
Kim Yeon-jun, an analyst at Korea Investment & Securities Co., forecast Samsung Electronics' second-quarter revenue at 178.7 trillion won and operating profit at 86 trillion won. Operating profit is expected to be in line with the market estimate of about 85 trillion won.
However, as additional employee compensation expenses decided through labor-management talks were reflected in the second quarter, profit estimates fell from previous levels. Korea Investment & Securities Co. reflected 18 trillion won in compensation expenses for the first and second quarters in this quarter's results and a total of 47 trillion won in expenses for the year. Accordingly, annual operating profit estimates for this year and next were revised down by 4% and 5%, respectively.
Kim explained, "This adjustment to earnings estimates is merely the accounting front-loading of stock-based compensation expenses and is unrelated to fundamentals or the memory industry outlook."
Rather, analysts said market attention will shift back to HBM competitiveness. Korea Investment & Securities Co. assessed that Samsung Electronics is expanding cooperation with Google while simultaneously pursuing expanded supply to Nvidia based on HBM4 and securing an average selling price (ASP) premium.
In particular, starting in 2027, it projected the company will rank No. 1 in both HBM revenue and operating profit, not only in general-purpose DRAM. It also expected that, following HBM4, the next-generation HBM4E will maintain existing processes, limiting the burden of transitioning to new products.
Kim said, "Long-term supply contracts are being signed sequentially on terms similar to competitors or more favorable to Samsung Electronics," adding, "Expanding HBM market share and higher ASPs than competitors will drive mid- to long-term earnings growth."
Kim added, "With the strike risk resolved, market attention will refocus on the memory cycle and HBM competitiveness," and, "While short-term profit estimates have been lowered due to the recognition of stock-based compensation expenses, the visibility and sustainability of mid- to long-term profits are instead strengthening."