[Special Stock] Samsung Electronics Target Price Raised, Falls Over 2% Amid Foreign 'Sell-Off'

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[Asia Economy Reporter Ji Yeon-jin] Samsung Electronics' stock price is falling on the 28th due to a selling spree by foreign investors. Despite the earnings shock in the third quarter, unlike the securities firms that began raising target prices while highly evaluating Samsung Electronics' competitiveness amid the semiconductor downturn, the stock price is retreating.

As of 10:01 a.m. on the day, Samsung Electronics is trading at 58,200 KRW on the Korea Exchange, down 2.02% (1,200 KRW) from the previous day. Samsung Electronics had shown a five-day consecutive rise since the 21st of this month, recovering to 59,500 KRW the day before.

In particular, Samsung Electronics recorded a slight increase even after announcing that its semiconductor division's operating profit in the third quarter of this year was halved compared to the previous year. This contrasted with SK Hynix, which closed down 4.15%. The promotion of Samsung Electronics Vice Chairman Lee Jae-yong to Chairman of Samsung Group acted as a positive factor, and Samsung Electronics' statement that it would continue investing despite the semiconductor industry downturn seemed to support investor sentiment.

However, foreign investors have shown a selling bias, having net sold 349,114 shares on the 27th and continuing to do so on this day. Foreign investors are expanding their sales of SK Hynix shares following the previous day.

Earlier, major domestic securities firms maintained their buy ratings and target prices for Samsung Electronics in reports published in the morning. Some securities firms raised their target prices.

Memory manufacturers reduce production capacity next year, causing semiconductor supply shortage in 2024

NH Investment & Securities maintained a buy rating on Samsung Electronics and raised the target price from 67,000 KRW to 72,000 KRW. The basis for the target price increase is the upward revision of 2024 earnings estimates and changing the valuation base year to 2023. Do Hyun-woo, a researcher at NH Investment & Securities, said, "Due to memory manufacturers reducing production in 2023, a shortage of memory semiconductors is expected in 2024, and the resulting increase in Samsung Electronics' profits is expected to be greater than previously anticipated."

On the same day, Daol Investment & Securities slightly raised its previous target price from 68,000 KRW to 69,000 KRW.

Samsung Electronics announced that its sales for the third quarter of this year were 76.78 trillion KRW, down 0.6% year-on-year, and operating profit decreased by 23.0% to 10.85 trillion KRW. In particular, semiconductor operating profit was halved (-48.7%) to 5.1 trillion KRW, and home appliances (CE) also dropped 30.6% to 300 billion KRW in final tally.

After the announcement of these results, most securities firms maintained their buy ratings and target prices. The target prices maintained were: Korea Investment & Securities (83,000 KRW), Samsung Securities (90,000 KRW), Ebest Securities (80,000 KRW), Kiwoom Securities (73,000 KRW), Shinhan Investment Corp. (70,000 KRW), SK Securities (75,000 KRW), DB Investment Securities (83,000 KRW), Hyundai Motor Securities (78,000 KRW), Daol Investment & Securities (72,000 KRW), Cape Investment & Securities (80,000 KRW), Meritz Securities (82,000 KRW), Hana Securities (77,000 KRW), BNK Investment & Securities (77,000 KRW), and KB Securities (75,000 KRW).

Samsung Electronics will not cut semiconductor production next year... Contrast with SK Hynix's 50% production cut

Despite the uncertainty in the semiconductor market next year, Samsung Electronics' statement that it will not make artificial production cuts is cited as the reason securities firms highly value Samsung Electronics' corporate value. Earlier, SK Hynix announced that it would reduce next year's investment scale by more than 50% compared to this year's investment, which is expected to be in the high 10 trillion KRW range. This is a significant reduction in investment comparable to the industry's capex decline in 2008-2009. Competitors such as Micron and Kioxia in the U.S. also announced unprecedented supply reduction strategies.

Park Yoo-ak, a researcher at Kiwoom Securities, said, "The price of memory semiconductors in the second half of this year fell significantly below market expectations as expected, and considering the competitive environment within the memory semiconductor industry, NAND, which is approaching marginal cost, is expected to see market improvement in the first half of next year amid manufacturers' production cuts. In the case of NAND, reflecting Samsung Electronics' intention to expand market share, another round of downward revision of market forecasts is expected, and Samsung Electronics' stock price is expected to outperform the market and competitors for the time being." Park Sung-soo, a researcher at Korea Investment & Securities, said, "Samsung Electronics' corporate value remains at a historically low level, which we believe excessively reflects the market downturn. The more market uncertainty increases, the more the competitiveness as a leading company will be revealed."

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