Where Is Samsung Electronics' Stock Price Headed? "Management Also Full of Worries"... Slipping Again Toward 60,000 Won?

Samsung Electronics Q4 Earnings Slowdown... Potential for Further Stock Price Adjustment↑

[Asia Economy Reporter Lee Seon-ae] Will Samsung Electronics, the "national blue-chip," be able to escape the "60,000 won stock" range in June? The sentiment in the securities industry is filled with anxiety. With forecasts suggesting a slowdown in fourth-quarter earnings, it seems unlikely that Samsung Electronics will break through not only the "70,000 won stock" level but even escape the "60,000 won stock" range.

According to the Korea Exchange on the 1st, Samsung Electronics closed at 67,400 won the previous day. The stock price has remained in the 60,000 won range for more than two months, earning the label "60,000 won stock." Samsung Electronics' stock price rose from the 60,000 won range in October last year to the 80,000 won range by the end of the year, raising expectations for a "100,000 won stock." However, it has been on a downward trend since the beginning of this year and has fallen back to the 60,000 won range since the end of March.

Because it is a "national stock," the internal management of Samsung Electronics has also been deeply concerned. In fact, at the end of April, an internal email encouraging some executives at the vice president level and above to purchase company shares was sent. The email even included information about loan products for those needing loans to buy shares, which underscored the management's significant worries about the sluggish stock price.

However, the main factor holding back Samsung Electronics' stock price at that time was not the company's fundamentals or industry conditions but rather the global tightening policies that dampened investment sentiment in big tech. Concerns about a recession reducing semiconductor demand dragged down the stock prices of global semiconductor companies such as Intel, Nvidia, and AMD, as well as Samsung Electronics. Additionally, foreign investors continuously sold Samsung Electronics shares, which have a high ownership ratio, as part of risk management in the domestic market, further impacting the stock price.

Now, forecasts of a slowdown in Samsung Electronics' earnings have emerged. According to Hi Investment & Securities, Samsung Electronics' operating profit for the second quarter of this year is expected to improve to 15.2 trillion won, supported by NAND price increases and subsidies from customers in the display sector, as well as the rise in the won-dollar exchange rate, despite weakness in the IT & Mobile (IM) division. Song Myung-seop, a researcher at Hi Investment & Securities, stated, "Due to the slowdown in IT set shipments and inventory increases in the first half of this year, semiconductor purchases by customers are likely to slow down in the future. Samsung Electronics' quarterly earnings are expected to start declining from the fourth quarter due to falling semiconductor prices and renewed weakness in the IM division."

This is because IT demand in the U.S. is slowing down as the effects of economic slowdown and inflation begin to appear, and IT demand in Europe, where the consumer confidence index has sharply dropped since March, is also expected to worsen. Despite economic stimulus measures, China's IT demand has not improved due to city lockdowns, which is another obstacle. Researcher Song said, "Along with the economic slowdown, supply chain disruptions, the Russia-Ukraine war, and the effects of city lockdowns in China have combined to make the deterioration in memory semiconductor demand more visible. We have lowered the CY22 DRAM demand growth forecast from the previous 18.3% to 14.0%." He added, he expects Samsung Electronics' stock price to likely move within the range of the low 60,000 won to the low 80,000 won until leading economic indicators that confirm economic and demand improvements are announced.

Cape Investment & Securities also lowered its target price to 100,000 won while downgrading demand forecasts due to external negative factors. Park Sung-soon, a researcher at Cape Investment & Securities, pointed out, "Concerns about memory demand are growing due to external negative factors."

He judged that concerns about servers, which had been a pillar of demand, are increasing. Researcher Park analyzed, "The stock price reacted sensitively to news of order cuts from cloud customers in the Greater China region and the extension of server lifespans (depreciation periods) by Amazon Web Services (AWS)." However, he added, "PC demand from enterprises partially offsets the demand slowdown, and mobile demand is expected to improve in the second half with the easing of China's lockdowns. Server demand is expected to remain solid, centered on Internet Data Center (IDC) companies."

Researcher Park explained, "Despite demand concerns, we expect Samsung Electronics' memory prices to rise in the second half because the supply growth rate is also limited," noting that global equipment companies are experiencing parts supply shortages. He also said, "Yield improvements are steadily progressing in the leading-edge foundry processes, which are a major concern in the market," and evaluated, "The foundry division will see quarterly profitability improvements."

He maintained a "buy" recommendation, stating, "Samsung Electronics' stock price is judged to have fully reflected external negative factors."