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Sunday, February 25, 2018
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Analysts dispute concern about Samsung and the memory industry

Tuesday, December 05, 2017

The stock price of Samsung Electronics is expected to continue rising, according to analyst here, Friday, without a serious plunge as projected by Morgan Stanley.

Also, they agreed with a Goldman Sachs report that concerns over Samsung's market value collapse were excessive. "Excessive concerns over the cycle of memory chips in the semiconductor industry were affecting the stock price," Goldman Sachs analyst Daiki Takayama said in the report this week. "We see the current price as an attractive opportunity to buy shares. We found no factors attributing a change in our positive recommendation on Samsung Electronics."

Goldman Sachs also maintained its recommendation of a "buy" rating with a target price of 3.52 million won for a Samsung share.

On Sunday, local time, Morgan Stanley released a negative report on Samsung's market value stating that the current cycle in memory chips is expected to peak soon and the electronics company's gains will not grow next year. In its report, Morgan Stanley also downgraded its recommendation from "overweight" to "equal-weight" and lowered its target price to 2.8 million won from 2.9 million won.

The report said, "We see downside risk as NAND flash memory chip prices have started to reverse in the fourth quarter of 2017. Meanwhile, visibility on DRAM supply-demand dynamics has been reduced beyond the first quarter of 2018."

Securities firms have released reports similar to the Goldman Sachs report with positive reviews of the potential growth of Samsung shares.

In its report, eBest Investment & Securities said, "Samsung Electronics is still undervalued with expectations of its price-earnings ratio (PER) standing at 7.6 times this year and is expected to remain around 6.5 times next year. " A low PER means a company's shares are undervalued.

Mirae Asset Daewoo Securities projected that Samsung Electronics will post 64.6 trillion won in operating profit next year, up 17 percent from this year, which also was the highest in its history.

"Samsung will see its operating profit in the semiconductor sector increase 30 percent next year, leading the improvement of its performance in general," Mirae Asset Daewoo Securities analyst Do Hyun-woo said. "Considering its rising profits, Samsung's stock price based on its expected performance next year is still greatly undervalued compared to the values of the company's competitors worldwide."

Referring to the Morgan Stanley projections of the excessive supply of DRAM chips and the shrinking of NAND Flash memory product demand, which could negatively affect Samsung's profitability, Kiwoom Securities said otherwise.

"Those who worry about an excessive supply of DRAM chips, triggered by a move to expand production equipment, overlook manufacturing capability loss and low process changeover efficiency that the chipmaker is suffering," Kiwoom Securities analyst Park Yu-ak said. He also forecast that the expected price drop in NAND Flash memory products will consequently lead to a hike in demand as there are many potential buyers who are waiting for the price to decrease.

Hyundai Motor Investment & Securities said Chinese chipmakers will not be a serious threat to Samsung's semiconductor business.

"Among many Chinese memory semiconductor providers, only Yangtze Memory Tech is considered to be able to pose a threat to Samsung in the long term as it is escalating its investment in 3D NAND technology," Hyundai Motor Investment & Securities analyst Noh Geun-chang said.

"Innotron is busy dealing with trouble regarding intellectual property rights while JHICC is seeking to focus on niche markets. They will not seriously impact Korea's DRAM industry."

By: DocMemory
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