On Thursday, HSBC analyst Ricky Seo updated the price target for Samsung Electronics Co Ltd (KS:005930:KS) (OTC: SSNLF (OTC:SSNLF)), raising it to KRW95,000 from the previous KRW117,000. The firm continues to recommend a Buy rating for the stock.
Seo's reassessment comes amidst a significant decline in Samsung's share price, which has dropped 30% compared to the KOSPI's 10% fall since July, driven by concerns over dropping memory prices and a potential oversupply of high-bandwidth memory (HBM) projected for 2025.
Seo believes that the market's reaction to the anticipated oversupply and price drops in the memory sector is excessive. He argues that only legacy DRAM (DDR4/LPDDR4) and NAND prices are expected to decrease. This is due to a robust pricing outlook for server DRAM and DDR5/LPDDR5, as well as NVIDIA (NASDAQ:NVDA)'s move towards normalizing production by the end of the fourth quarter of 2024. These factors suggest that concerns about an HBM oversupply may be overstated.
From a supply perspective, Seo notes that while nominal capacity appears adequate, persistent yield and utilization issues are likely to restrict output growth. This is particularly true given the challenges associated with manufacturing 12-high versus 8-high HBM and larger die sizes. Furthermore, he anticipates that conservative capital expenditures in DRAM will extend the industry's upcycle into 2026.
Lastly, Seo points to the potential for production cuts and delays in the transition to new technologies within the NAND sector as factors that will limit output growth. These production challenges are expected to contribute to a rebound in NAND prices starting from late in the second quarter of 2025. This outlook provides a more nuanced view of the future pricing dynamics within the memory market and supports HSBC's continued positive stance on Samsung Electronics' stock.
In other recent news, Samsung Electronics Co Ltd is navigating a series of significant developments. Citi has revised its outlook on Samsung, reducing its stock target due to anticipated lower-than-expected operating profit for the third quarter of 2024, mainly due to reduced demand in the semiconductor business. However, the firm maintained a Buy rating on Samsung's stock.
Meanwhile, UBS has also maintained a Buy rating on Samsung shares, expressing confidence in the company's future performance despite a dip. This confidence is grounded in the anticipation of a recovery in the memory procurement from PC and Chinese smartphone manufacturers by the fourth quarter of 2024.
On a different note, BofA Securities has downgraded Samsung's stock from Buy to Neutral, primarily due to projections of a gradual decline in operating profit through the second quarter of 2025. This adjustment is attributed to anticipated drops in memory average selling prices.
In the legal realm, Samsung is facing two lawsuits. Epic Games plans to sue Samsung and Google (NASDAQ:GOOGL), alleging anti-competitive practices. Additionally, Samsung, along with Xiaomi (OTC:XIACF) and other smartphone manufacturers, has been implicated in a case of alleged antitrust violations in India. These are recent developments that investors should be aware of.
InvestingPro Insights
Recent data from InvestingPro adds depth to HSBC's bullish outlook on Samsung Electronics. Despite the recent stock price decline, Samsung's financials remain robust. The company's revenue for the last twelve months as of Q2 2024 stood at $203.84 billion, with a healthy revenue growth of 3.75%. More impressively, Samsung's EBITDA growth reached 12.62% over the same period, indicating strong operational efficiency.
InvestingPro Tips highlight Samsung's financial strength and market position. The company holds more cash than debt on its balance sheet, suggesting financial stability amid market volatility. Additionally, Samsung has maintained dividend payments for 32 consecutive years, demonstrating a commitment to shareholder returns even in challenging times.
These insights align with Seo's optimistic view on Samsung's prospects in the memory market. The company's strong financial position could allow it to weather short-term market fluctuations and potentially capitalize on the anticipated rebound in NAND prices.
For investors seeking a deeper analysis, InvestingPro offers 12 additional tips for Samsung Electronics, providing a comprehensive view of the company's potential in the evolving tech landscape.
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