Samsung has long been a driving force behind South Korea’s economic development. While a slowdown in the semiconductor industry has severely affected its stock price in recent months, the company remains the favorite among Korean investors. Domestic investors are optimistic that Samsung’s stock will rebound soon and are holding on to it.
Samsung is the preferred brand for Korean investors
Samsung’s share price is down over 32 percent since peaking at the end of last year. It closed on Wednesday at KRW 55,300 (roughly $39) on the Korea Exchange. The price reached KRW 80,500 (~$57) on December 24, 2021. This downward trajectory means analysts continuously revise (read: lower) their price target for Samsung’s stock. According to The Investor, NH Investment & Securities analyst Do Hyun-woo has lowered the price target from KRW 75,000 (~$53) to KRW 70,000 (~$50).
Analyst Park Sung-soon of Cape Investment & Securities is now targeting a price of KRW 80,000 (~$57), down from the previous target of KRW 90,000 ($64). Hanwha Investment & Securities also lowered the price target for Samsung’s stock to KRW 81,000 (~$58) from its January estimate of KRW 110,000 (~$78).
“Aggravating memory chip down cycle” is cited as the primary factor behind the downfall of Samsung’s stock price. Analysts are estimating DRAM chip prices to decrease by nine percent this year and by 12 percent through 2023. The demand for server memory chips is also expected to get hit. As such, the company’s operating profit for Q3 2022 may be below KRW 12 trillion (~$8.5 billion), down about 25 percent from the same period year. This figure is even lower than last Friday’s analyst consensus of KRW 13.3 trillion (~$9.4 billion).
However, this downward trend hasn’t affected investors’ strategy. Samsung remains the preferred choice of investors in South Korea. Since January this year, individual investors have reportedly bought Samsung stock worth KRW 50.5 trillion (~$36 billion) and divested KRW 33 trillion (~$23 billion) worth of shares. It’s worth mentioning here that over 15 percent of South Korean have invested in the Samsung Group of companies. The conglomerate has 8.1 million shareholders, while the country’s total population is about 52 million.
The semiconductor market may not revive anytime soon
Samsung isn’t the only South Korean semiconductor company to suffer a massive decline in share price in recent months. Its hometown rival SK Hynix has also seen its stock drop over 30 percent this year. The latter is the third-biggest semiconductor firm globally by revenue, behind Samsung and Intel. Slowing chip sales means analysts have lowered their price target for SK Hynix as well, with The Investor reporting a decline of up to 13 percent.
The long-term outlook for both South Korean semiconductor giants isn’t great either. Analysts are estimating the chip industry to suffer declines through 2023. Even CMOS image sensors could see the first decline in sales and shipments in over 13 years. It remains to be seen if the semiconductor market bounces back anytime soon.