After Samsung Electronics posted the highest quarterly results on record, target prices on Wall Street in Korea spread by more than double from 300,000 won to 650,000 won. Lee Min-hee, a BNK Investment & Securities researcher, said memory demand momentum has passed its peak and cut the target price by 130,000 won in a month and a half. In contrast, Korea Investment & Securities Co. raised its target price to 650,000 won, saying the structure of the memory industry is changing as long-term supply contracts expand.
As of the 31st, according to the financial investment industry, eight securities firms issued target price reports after Samsung Electronics' second-quarter earnings announcement. Korea Investment & Securities Co. and Meritz Securities raised their targets, while BNK Investment & Securities lowered theirs. DS Investment & Securities, Daishin Securities, Hana Securities, Kiwoom Securities, and KB証券 maintained their existing targets.
Samsung Electronics posted sales of 171.4995 trillion won and operating profit of 89.4924 trillion won in the second quarter this year. That was up 130% and 1,813.8%, respectively, from a year earlier, with both sales and operating profit the highest on record for a quarter. Operating profit also beat the market forecast of 84.8 trillion won by 5.5%.
There was no disagreement that the results were the best ever, but opinions diverged on whether this can continue. BNK Investment & Securities put more weight on the possibility that the uptrend in memory demand is slowing and the risk of oversupply is growing. Korea Investment & Securities Co. assessed that, based on long-term supply contracts, the memory business is shifting to a more stable structure than in the past.
◇ "Possibility of profit decline after the fourth quarter"… BNK Securities cuts target within a month and a half
BNK Investment & Securities presented the lowest target price. Lee Min-hee, a BNK Investment & Securities researcher, lowered Samsung Electronics' target price by 30.2% to 300,000 won from 430,000 won. It is the lowest among Samsung Electronics target prices proposed by domestic securities firms over the past month. The previous day's closing price for Samsung Electronics was 207,000 won.
The researcher raised Samsung Electronics' target price to 430,000 won from 280,000 won on the 15th of last month, but lowered it again to 300,000 won in about a month and a half. While expecting third-quarter operating profit at Samsung Electronics to further improve to 114.74 trillion won, the researcher judged that demand momentum has already passed its peak.
BNK Investment & Securities analyzed that uncertainty in demand for information technology (IT) products is growing due to a deterioration in consumer sentiment and rising component prices. It also noted that global big tech corporations are pivoting to improve the efficiency of AI capital spending, and that higher interest rates and instability in funding markets have heightened doubts about the sustainability of investment plans reliant on borrowing.
It also pointed to the burden of memory manufacturers continuing large-scale capacity expansions while demand growth slows. While higher memory prices will improve Samsung Electronics' results in the second half, the likelihood of results declining after the fourth quarter has increased as supply outpaces demand.
However, it maintained a "buy" rating, reflecting the possibility of a large special dividend under the shareholder return policy, increased advanced foundry process orders, and expectations for a rise in high bandwidth memory (HBM) market share next year. The report's title was presented as "The peak has passed, but a haven within the sector."
The researcher is regarded as having presented the most conservative outlook on the domestic semiconductor cycle. Among domestic securities firm researchers, this researcher was the first to withdraw a buy rating on SK hynix, and on the 29th also lowered SK hynix's target price to 1.48 million won from 1.85 million won.
◇ "Shift to an order-based business"… Korea Investment & Securities Co. sets target at 650,000 won
In contrast, Korea Investment & Securities Co. raised Samsung Electronics' target price by 10.2% to 650,000 won from 590,000 won. It is the highest target proposed by securities firms over the past month and is 350,000 won higher than BNK Investment & Securities.
Chae Min-suk, a Korea Investment & Securities Co. researcher, called the results "a game with the rules changed." The researcher noted that Samsung Electronics signed multi-year supply contracts with five major global hyperscalers, with five years as the baseline, and is wrapping up additional contract talks with five large AI-related customers.
The analysis is that if capital spending is carried out based on customers' actual demand under long-term contracts, the possibility of oversupply, which repeated with each past semiconductor cycle, could decline. Samsung Electronics plans to keep 60% to 70% of DRAM and NAND production capacity under multi-year contracts, while securing gains from rising market prices with the remaining volume.
Korea Investment & Securities Co. raised its operating profit forecasts for Samsung Electronics for this year and next by 3% and 7%, respectively, reflecting the expansion of multi-year supply contracts and the possibility of higher HBM prices in 2027. It also saw as a value driver the principle of returning 50% of free cash flow (FCF) generated on the back of record results to shareholders.
Chae said, "The current share price is 1.3 times the 2027 book value per share (BPS), and given the earnings growth phase in 2027, it is extremely undervalued," adding, "It is difficult to predict when market concerns will be resolved, but the current valuation does not fully reflect the value of solid results, cash generation, and a clear shareholder return policy." Chae added, "It is necessary to focus on medium- to long-term corporate value rather than short-term market sentiment."