Samsung Electronics' Unstable 'Stock Price' Despite Strong Performance

[Asia Economy Reporter Hwang Junho] Samsung Electronics posted record-breaking earnings in the third quarter of this year, but its stock price remains stagnant. Various issues, including the downturn in the memory market, have dampened investor sentiment. However, the securities industry accepted Samsung Electronics' expectation during the 'conference call' that the memory semiconductor downcycle will be shorter, maintaining their target stock prices.

As of 10:20 AM on the 29th, Samsung Electronics recorded 70,500 KRW, down 200 KRW (0.28%) from the previous day. The previous day closed at 70,700 KRW, up 0.86%. Samsung Electronics announced that it achieved an operating profit of 15.8 trillion KRW in the third quarter, the second-highest operating profit since 17.6 trillion KRW in Q3 2018. Despite the record-breaking earnings announcement, investors seem to be deeply conflicted between buying and selling.

Foreign investors, who hold the key to supply and demand, are also still withdrawing. Foreigners have been net sellers of Samsung Electronics for five consecutive trading days from the 22nd to the previous day. In the last two days up to the previous day, the net selling volume exceeded 2 million shares.

[Image source=Yonhap News]

However, the securities industry generally agrees with the outlook Samsung Electronics presented during the conference call after the earnings announcement. Most securities firms are maintaining their existing target prices, set between 90,000 and 105,000 KRW, while monitoring stock price fluctuations. Hwang Minseong, a researcher at Samsung Securities, said, "Recently, foreign investors' focused questions have narrowed down to whether they should buy more Samsung Electronics shares and when to buy if so," adding, "This indicates that the market believes various supply and demand issues related to Samsung Electronics will not last long."

The dominant view is that concerns about the semiconductor off-season have already been reflected in the current stock price. Kim Dongwon, a researcher at KB Securities, analyzed, "This year's Samsung Electronics stock price fluctuation rate (highest price ~ lowest price) of 24.4% is similar to the 30% fluctuation rate during past semiconductor downturn cycles, suggesting sufficient price adjustment has taken place."

Concerns about a chicken game in the memory sector have also been somewhat alleviated. Lee Wonsik, a researcher at Korea Investment & Securities, stated, "Samsung mentioned that it will flexibly operate its memory business plans according to demand conditions, which means strengthening a profitability-focused operation plan rather than a market share expansion strategy," adding, "We believe concerns about a chicken game within the memory industry, which investors worried about, have been somewhat resolved."

Concerns about the fourth-quarter earnings of other business divisions outside the semiconductor sector are also limited. Lee Sunhak, a researcher at Hanwha Investment & Securities, analyzed, "The IM division is expected to have smartphone sales similar to the third quarter, and demand for the Galaxy Z series is also expected to be maintained," adding, "The DP division is expected to achieve record-high operating profits due to entering the peak season for OLED."

However, contrary to this positive outlook, there is also a view that the decline in memory prices could exceed initial expectations. Park Yooak, a researcher at Kiwoom Securities, said, "Although expectations for a recovery in the DRAM market in the first half of next year are solidifying the short-term downside rigidity of Samsung Electronics' stock price, the prolonged supply shortage of components is beginning to manifest as a decrease in customer orders," adding, "There is a possibility that the price decline of memory semiconductors will exceed expectations, so we are lowering the target price to 90,000 KRW."