Analysts split over future course of Samsung Electronics' stock price

Asia's Tech News Daily
Analysts split over future course of Samsung Electronics' stock price

By Anna J. Park

Despite achieving a record-high quarterly revenue of 73.9 trillion won ($6.2 billion) and the second-highest quarterly operating profit of 15.8 trillion won in the third quarter, Samsung Electronics’ recent sluggish stock price movement is upsetting some four million local retail investors who parked their money in the company.

After announcing quarterly earnings late last month, the stock price of Korea’s largest blue chip company hovered around the 70,000 won mark, which is more than 38 percent lower than its 52-week high of 96,800 won logged in January this year. The lackluster stock performance was mainly due to forecasts of a further drop in memory chip prices after the fourth quarter.

The stock price seemed to heat up again up early this week when it soared to 75,300 won at Tuesday’s close following Samsung’s announcement of a $17 billion investment to build a semiconductor manufacturing facility in Texas. The investment raised investors’ expectations over the non-memory chip business, which is regarded a key growth engine.

However, the stock price quickly fell back to 72,300 won at the close of Friday’s session.

Analysts attributed the drop to the fact that the semiconductor foundry will not be completed until late 2024.

“Semiconductor foundry investment would take at least a couple of years to build, and it’s still uncertain whether the facility’s production period would synchronize with a favorable semiconductor demand cycle,” a market insider said on condition of anonymity. “At least three years would be needed until the new foundry’s performance would be reflected in the stock price,” he added.

Some market insiders also say that the company’s listless stock price movement lately reminds them of the firm’s stock performance in 2017.

Samsung Electronics set new record earnings every quarter from the second quarter of 2017 to the third quarter of 2018. But its stock price continued on a general downward trend during that time. The price only started to rally from early 2019, doubling just a year later.

Remembering the past, some more optimistic analysts believe the stock price could enter an upward trajectory from early next year. An undervalued stock price and high dividend rate are also expected to prevent a further drop of the price.

“Cloud businesses in North America are forecast to proactively expand their investment into servers for establishing metaverse platforms in the first half of next year. Given the past 10 months’ price correction period, now is considered the appropriate time to increase weight on Samsung Electronics,” said Kim Dong-won, analyst at KB Securities, said.

However, other analysts pointed out that new growth momentum would be necessary to reverse the price movement trend.

“It seems the company needs momentum, such as securing new fabless clients in the non-memory chip sector or major M&As for its stock price to receive a new driving force,” a recent report by Hana Financial Investment stated.

Local brokerages forecast the company’s quarterly operating profit would fall to 11 trillion won in the second quarter of next year, marking a steep fall from 15 trillion won in the third quarter of this year.

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