Why Does Samsung Electronics Raise Its Target Price Even When Its Stock Falls?

Stock Price Falls 8.33% in Two Weeks... Limited Short-Term Impact from Novel Coronavirus

Samsung Electronics' DRAM 'Flashbolt' (Photo by Asia Economy DB)

[Asia Economy Reporter Kum Bo-ryeong] Although Samsung Electronics' stock price recently declined due to the spread of the novel coronavirus infection (Wuhan pneumonia), the target price was rather raised.

According to the Korea Exchange on the 4th, Samsung Electronics' closing price on the previous day was 57,200 KRW. Compared to 62,400 KRW on the 20th of last month, the stock price fell by 8.33% in just two weeks.

In particular, on the day of the earnings announcement on the 30th of last month, the stock price dropped 3.21% compared to the previous day. This was because Samsung Electronics presented a conservative stance on the memory semiconductor sector for the first quarter of this year during the conference call. Additionally, in the Taiwan stock market, which opened for the first time after the Chinese Lunar New Year, TSMC's stock price plummeted 4.9% due to concerns over the novel coronavirus, causing a decline in investment sentiment in the semiconductor sector.

However, securities firms raised their target prices for Samsung Electronics. Hana Financial Investment adjusted its target price upward from 63,000 KRW to 67,000 KRW, DS Investment Securities from 60,000 KRW to 73,000 KRW, and Daishin Securities raised it from 70,000 KRW to 75,000 KRW.

There is an expectation that the direct impact of the novel coronavirus on memory semiconductor production will be limited in the short term. Lee Soo-bin, a researcher at Daishin Securities, explained, "DRAM and NAND production plants in China are operating according to the existing plan. Although there are regional differences, the return to work of major Original Design Manufacturers (ODMs) has been postponed to the 10th, and actual shipments are expected to be delayed by 1-2 weeks for server ODMs and more than 2 weeks for smartphone companies. If the production resumption date is not delayed again under the current situation, the impact on memory semiconductor supply and demand will be limited."

There are also sufficient factors for performance improvement this year. The investment trend of front-end customers in servers is expected to continue due to the influence of 5G mobile communication services. Strengthening competitiveness in the premium market is also anticipated through the release of the Galaxy S20 and new foldable phones in the first half of the year. Kwon Tae-woo, a researcher at DS Investment Securities, said, "We will strengthen profitability based on efforts to normalize semiconductor inventory in the first half and flexible investment plans due to a conservative market. The rebound in DRAM prices in the first half and the NAND price rebound that began in the fourth quarter of last year are expected to continue." An increase in OLED business profits is also expected due to the rise in organic light-emitting diode (OLED) operating rates.

This content was produced with the assistance of AI translation services.