On Thursday, HSBC adjusted its outlook for SK Hynix (000660:KS), a major player in the semiconductor industry, by reducing the price target to KRW250 from the previous KRW280. Despite this adjustment, the firm has maintained its Buy rating on the stock.
The decision to lower the price target comes after SK Hynix's shares experienced a significant 28% decline since July, a steeper drop compared to the 10% fall of the KOSPI index. This downturn is largely attributed to market concerns regarding a potential dip in memory prices and an oversupply of High Bandwidth (NASDAQ:BAND) Memory (HBM) expected in 2025.
Contrary to the prevailing market sentiment, HSBC's analysis suggests that the concerns may be exaggerated. The firm anticipates that the price decreases will be confined to legacy Dynamic Random-Access Memory (DRAM) such as DDR4 and LPDDR4, as well as NAND flash memory. HSBC points out several factors that could mitigate the impact: strong pricing outlook for server DRAM and next-generation DDR5/LPDDR5, normalization of production by NVIDIA (NASDAQ:NVDA) starting from the fourth quarter of 2024, and persistent yield and utilization challenges in manufacturing advanced HBM.
Furthermore, HSBC believes that conservative capital expenditure in the DRAM sector could extend the current upcycle into 2026. Additionally, potential production cuts and delays in technology migration within the NAND sector are likely to constrain output growth, which could lead to a price rebound starting from the latter half of the second quarter of 2025.
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