"Always Rose in December" Yet Again Distant '60,000 Won Electronics'... No Year-End Rally?

In the Past 10 Years, Stock Prices Rose 7 out of 10 Times in December
Dividend Expectations Fade Amid Poor Business Conditions, Creating a Stock Momentum Gap

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] Samsung Electronics' stock price performance this winter is disappointing. Typically, stock prices tend to rise at the end of the year, but this year shows a different pattern. Semiconductor demand is expected to recover only after the first half of next year, so Samsung Electronics' stock price is likely to continue its sluggish trend into early next year.

According to the Korea Exchange on the 19th, Samsung Electronics closed at 59,500 KRW on the 16th. Although it ended trading with a slight increase, it still remains in the '50,000 KRW range.' Starting the year in the 78,000 KRW range, it has been struggling recently around the 58,000 KRW range. On September 30th, it even dropped to 51,800 KRW, and the trajectory of Samsung Electronics' stock price this year has been nothing but a disappointment for individual investors.

Over the past 10 years, Samsung Electronics' stock price rose in December 7 out of 10 times. It has been considered one of the stocks that typically experience a 'year-end rally.' Expectations for dividends and next year's earnings outlook have been the driving forces behind the year-end rally. However, in the securities industry, voices are growing that the momentum gap in stock prices will continue through the end of this year and early next year, and that expectations for a rally should be abandoned.

Choi Do-yeon, a researcher at Shinhan Investment Corp., said, "The end of the year and the beginning of the year represent a momentum gap period for Samsung Electronics' stock price, and the timing for a trend rally (bottoming out) is expected to be during the first half of next year," adding, "The rally is expected to start with order expansion and a sideways movement (stopping the decline) in the 12-month forward earnings per share (EPS) consensus." He further explained, "This will happen when the inventories of downstream customers are depleted and set shipments begin to increase," adding, "More time is needed to confirm this."

The semiconductor operating profit is expected to fall short of 3 trillion KRW due to memory prices and shipment volumes falling below expectations, which affects the momentum gap in stock prices.

Shinhan Investment Corp. forecasts Samsung Electronics' Q4 revenue at 77.3 trillion KRW and operating profit at 7.9 trillion KRW, below the consensus (operating profit of 8.3 trillion KRW). Semiconductor operating profit is expected to be only 2.8 trillion KRW.

Baek Gil-hyun, a researcher at Yuanta Securities, explained, "Despite the year-end peak season, there is no meaningful signal of mobile purchase recovery," adding, "Considering the weaker year-end season demand compared to the average year, memory semiconductor inventory carrying over into next year is likely to be higher than expected."

Dividend expectations are also fading. Samsung Electronics paid out 50% of its free cash flow as special dividends for three years from 2018 to 2020 and decided to maintain its shareholder return policy from 2021 to 2023. Although a large special dividend (10.7 trillion KRW) was paid at the end of 2020, the capacity for special dividends disappeared starting from the Q2 2022 earnings. It is expected that reinitiating special dividends next year will not be easy.

However, there is hope that after the first half of next year, the stock price may escape its sluggish trend due to industry recovery. Park Yoo-ak, a researcher at Kiwoom Securities, said, "NAND is reaching its marginal cost, and amid manufacturers' production cuts, industry improvement is expected to appear during the first half of next year," adding, "The rebound in the memory semiconductor industry and expectations for new foundry customer acquisitions will drive further stock price increases."

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