Morgan Stanley raises target price for Samsung Electronics to 70,000 KRW and SK Hynix to 230,000 KRW.
-Samsung Electronics maintains "Overweight", while SK Hynix is upgraded to "Neutral".
NAND flash production cuts are taking effect, with prices expected to rise up to 10% in Q2.
DRAM spot prices are rising, supported by China’s AI investment and economic stimulus policies.
V-shaped recovery in the semiconductor cycle is considered unlikely.
Opinion
The rebound in DRAM and NAND prices is primarily due to the impact of production cuts. The NAND market is projected to see a price increase of up to 10% in Q2, while China’s AI investment and policy support are boosting DRAM demand. However, Morgan Stanley warns that a rapid V-shaped recovery seen in past semiconductor cycles is unlikely, citing potential weak consumer sentiment and increasing competition as downside risks.
Core Sell Point
While the memory semiconductor recovery is taking shape, potential demand slowdowns and intensifying global competition could limit the price uptrend.
Morgan Stanley, which had maintained a conservative outlook on the semiconductor market, has now raised its target prices for Samsung Electronics and SK Hynix. With DRAM and NAND flash prices rebounding and production cuts by major players taking effect, expectations for gradual market recovery are growing.
In a report, 'DRAM-Looking beyond the valley' released on March 18, Morgan Stanley increased its target price for Samsung Electronics from 65,000 KRW to 70,000 KRW and for SK Hynix from 150,000 KRW to 230,000 KRW. While Samsung retained its "Overweight" rating, SK Hynix’s rating was upgraded from "Underweight" to "Neutral".
The semiconductor market is seeing the full impact of NAND flash production cuts, with prices expected to rise by up to 10% in Q2. Additionally, China’s AI investment and economic stimulus policies are expected to positively impact DRAM supply and demand. However, weak consumer sentiment and intensifying price competition from Chinese semiconductor firms could challenge the sustainability of the current uptrend.
Morgan Stanley sees greater upside potential in Samsung Electronics compared to SK Hynix. While HBM (High Bandwidth Memory) market growth is already priced in, Samsung is expected to benefit more from NAND production cuts and a slower decline in DRAM prices, leading to a clearer earnings recovery.
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