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Share price forecasts

Samsung investors fret over stock’s fall as analysts see further gains

Feb 10, 2021 (Gmt+09:00)


For retail investors of Samsung Electronics Co., the stock’s recent drop is reminiscent of the 2018 crash, when individuals who snapped up the market darling at the peak price suffered losses amid a grim industry outlook.

On Wednesday, the tech giant’s share fell for a third straight session to finish 1.3% lower at 81,600 won. The stock is down 16% from an intraday high of 96,800 won just a month earlier.

Samsung still trades well above the 50,000 won range seen in the second half of last year, but small investors who heavily purchased the stock in recent weeks are concerned that they may repeat the “buy at the top and sell at the bottom” trading pattern.

The latest decline in Samsung’s share price was led by foreign investors and local institutions that have sold a net 5.21 trillion won ($4.7 billion) of the stock and 6.51 trillion won worth, respectively, since the start of 2021.

Meanwhile, retail investors have aggressively bought into the stock, with their net purchases reaching a whopping 11.49 trillion won, amid signs of a global equities market recovery. Data show many of the individuals bought Samsung’s shares above 90,000 won.

With some brokerages slashing their forecasts for Samsung’s first-quarter operating profit to around 7.5 trillion won from 8.5 trillion won earlier, market chatter has emerged that Samsung’s current share price may be overvalued.

Back in 2018, Samsung’s shares were trading in the 50,000 won range when the company posted 58.89 trillion won in operating profit. Some analysts estimate Samsung’s operating profit at 45.97 trillion won this year and 59.31 trillion won in 2022.

Graphics by Jerry Lee

THEN AND NOW

Despite investor concerns, however, semiconductor analysts say that the situation now is different than in 2018, when the chip industry quickly slipped into a downcycle following a sudden surge in DRAM prices.

“In 2018 chipmakers significantly expanded their capacity, creating an oversupply situation and this, coupled with the start of the US-China trade friction, led to an industry downturn,” said Shinhan Investment Corp. analyst Choi Do-yeon.

“But now, the chip industry is entering an upcycle with an expected shortage of semiconductors in various sectors.”

Yuanta Securities analyst Lee Jae-yoon says non-memory chips in particular will be in short supply, making things different for Samsung, which relied heavily on DRAM chips for growth back then.

Samsung, the world’s top maker of smartphones, is also expected to get a tailwind from the US sanctions on Chinese smartphone maker Huawei Technologies Co.

According to stock market tracker FnGuide, Samsung’s revenue is forecast to rise to an all-time high of 261.63 trillion won this year and climb further to 287.21 trillion won next year. In 2018, the company posted 243.77 trillion won in revenue.

TIME FOR REVALUATION WITH UPSIDE POTENTIAL

Analysts say Samsung shares should be revalued with further upside potential, given favorable chip industry conditions and ample liquidity in the stock market.

Shinhan Investment’s Choi said Samsung’s valuation, measured by the price-to-book ratio, is already hovering around double its historically high multiples.

“Samsung is in a transition period in terms of the share price. With its solid earnings from the second quarter, we expect the stock to easily meet our target of 120,000 won,” he said.

Yuanta Securities recommends investors to buy Samsung on the dip, offering 107,000 won as its target price.

“Aside from the imminent chip upcycle, Samsung also stands to benefit from other businesses such as smartphones, image sensors and displays,” said Roh Geun-chang, head of research at Hyundai Motor Securities.

The brokerage has a Buy rating on Samsung Electronics with a target price of 110,000 won.

Write to Eui-Myung Park at uimyung@hankyung.com

In-Soo Nam edited this article.

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