Samsung Electronics Co.’s share price helplessly fell even below the 40,000 won (US$35.26) level, which was the psychological supporting line, hitting the lowest point in 22 months. A negative outlook for market conditions and the company’s performance made securities firms lower the target stock price and it led to the decrease in stock price again. With weaker demand than expected causing supply excess, foreign and institutional investors are also going on a selling spree. However, many experts say that semiconductor market conditions and Samsung Electronics’ business results will start improving from the second half of next year at the latest.
Samsung Electronics closed at 38,950 won (US$34.33) on Dec. 14, down 2.63 percent from the previous trading day. It hit a 52-week low and the lowest figure since February last year. The price of Samsung Electronics shares reached a record high at 57,220 won (US$50.44) on Nov. 1 last year based on the closing price. However, it has continued to show a downward trend amid concerns about the semiconductor boom coming to an end and it has dropped by 31.9 percent now compared to the highest figure.
The price of SK Hynix Inc. also plunged by 5.65 percent to 61,800 won (US$54.47), reaching a 52-week low. It dropped as much as 35.2 percent after peaking at 95,300 won (US$84) in May. This was because major securities companies all lowered Samsung Electronics’ performance forecasts and its target stock price based on the performance estimates released by Samsung Electronics a day earlier. According to Seoul-based financial data provider FnGuide, securities firms’ estimation of Samsung Electronics’ operating profit for this year and next year fell to 62.65 trillion won (US$55.22 billion) and 54.09 trillion won (US$47.68 billion), respectively. The estimated figures for this year and next year stood at 65 trillion won (US$57.29 billion) and 66 trillion won (US$58.18 billion), respectively, until the end of June.
In particular, the next year’s operating profit estimates decreased a whopping 18 percent from some 66 trillion won (US$58.18 billion) to some 54 trillion won (US$47.6 billion) due to the fact that the demand and the price in the memory chip sector are now falling faster than expected. Samsung Electronics said, “The memory chip output growth, or bit growth, in the fourth quarter has the possibility of negative growth in both DRAM and NAND flash chips and the price is likely to show a higher drop than expected. DRAM is expected to show some 10 percent fall next year, while NAND flash will record some 30 percent.” The securities industry has a more negative outlook. Yoo Jong-woo, an analyst at Korea Investment & Securities Co., said, “The price of DRAM and NAND flash chips are forecast to fall by 29 percent and 44 percent, respectively, next year. Since the semiconductor market is slowing down than expected, next year’s performance is highly likely to be poorer than expected as well. Particularly, the current weak demand has led to more inventory than expected. If the demand doesn’t pick up next year, the market will continue to show the supply excess until the second half of the year.”
Some said that the demand of server DRAM, which was expected to support the demand of memory chips as a whole, also dropped. Kim Woon-ho, an analyst at IBK Investment & Securities Co., said, “The sluggish demand of server DRAM is the biggest variable. It will be possible to forecast the time of demand rebound in the second quarter next year when the investment in cloud service providers and internet data centers (IDC) will be resumed.” Lee Kyeong-ho, an analyst at Samsung Securities Co., also said, “The weak demand of memory chips is largely due to external environments, such as the purchase delay of IDC, Intel’s short supply of CPU and trade war between the United States and China. Especially, the purchase delay of IDC seems to be more like a one-time purchase strategy than a structural slowdown of demand. With the release of Intel’s new CPU platform, the demand of memory chips will rebound in the second quarter next year.”
The securities industry all lowered Samsung Electronics’ target stock price on the same day. After Samsung Electronics released its performance guidance a day ago, nine out of 12 securities companies which presented an analysis report lowered the company’s target stock price. Only three of them – Samsung Securities, Daishin Securities and IBK Investment & Securities – maintained their initial target stock price.
In addition, big investors have continued to sell off Samsung Electronics shares. Foreign and institutional investors net sold 420.7 billion won (US$371.97 million) and 282 billion won (US$249.37 million) worth of Samsung Electronics stocks, including preferred share, respectively, this month alone. Individual investors bought in 701.6 billion won (US$620.34 million) worth of shares as part of buying the dip but they haven’t greatly contributed to the defense in stock price.
Institutional investors net sold 2.13 trillion won (US$1.88 billion) worth of Samsung Electronics shares until December 14 from May 4 when the company resumed trading after the stock split. Foreigners also sold off 1.53 trillion won (US$1.36 billion) over the same period. On the other hand, individual investors net bought 3.68 trillion won (US$3.25 billion) worth of Samsung Electronics shares.