On Monday, UBS expressed continued confidence in Samsung Electronics Co Ltd (KS:005930:KS) (OTC: SSNLF (OTC:SSNLF)) shares, maintaining a Buy rating with a price target of KRW97,000.00. The firm highlighted that Samsung shares have experienced a 22% decline year-to-date, which may be attributed to investor concerns over the memory cycle.
UBS anticipates that the current softening in memory procurement from PC and Chinese smartphone manufacturers will likely conclude by the fourth quarter of 2024.
UBS forecasts that Samsung will increase the production volumes of HBM3 12-Hi, including for Nvidia (NASDAQ:NVDA), into 2025. Moreover, the firm expects the 1c nm DRAM, set to enter mass production in the fourth quarter of 2024, to signify a pivotal moment in Samsung's execution relative to competitors.
The recent management changes within Samsung's Semiconductor division are viewed positively by UBS, which anticipates that the company will respond more promptly to any potential shifts in memory supply and demand concerning utilization rates.
The financial institution notes that Samsung is currently trading at 1.01 times its next twelve months (NTM) book value, which is considered a trough valuation. In light of this assessment, UBS believes that there is limited downside risk to Samsung's stock price and significant potential for upside gains.
This confidence is based on the expectation that the challenges faced by Samsung are temporary and that the company is well-positioned to navigate through the current market conditions.
InvestingPro Insights
Recent InvestingPro data aligns with UBS's positive outlook on Samsung Electronics. Despite the year-to-date stock decline noted by UBS, Samsung's financials remain robust. The company's P/E ratio of 15.83 and Price to Book ratio of 1.09 suggest that the stock may be undervalued, supporting UBS's view of limited downside risk and potential for upside gains.
InvestingPro Tips highlight Samsung's strong financial position, noting that the company "holds more cash than debt on its balance sheet" and "liquid assets exceed short term obligations." This financial stability could provide Samsung with the flexibility to navigate the current market challenges and capitalize on future opportunities in the memory chip sector.
Furthermore, an InvestingPro Tip indicates that "net income is expected to grow this year," which aligns with UBS's positive outlook on Samsung's future performance, particularly as the memory cycle is anticipated to improve.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide deeper insights into Samsung's market position and future prospects.
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