LS Securities analyst Jung Da-woon issued a report on the 21st recommending investors buy Samsung Electronics and SK Hynix stocks at current low prices following sharp declines amid semiconductor peak concerns. Samsung Electronics has fallen 34.8% from its intraday high this year, while SK Hynix has dropped 40.9%, according to the report. The analyst attributed the stock plunges to persistent worries about hyperscalers' return on investment relative to massive capital expenditures, compounded by attention on China's Kimi3 model's strong cost-effectiveness highlighted last week. Jung assessed that while the two companies face challenges reclaiming market leadership status, their valuations have reached historically low levels warranting accumulation. The report comes as South Korean semiconductor stocks face heightened scrutiny over AI infrastructure investment sustainability and competitive pressures from Chinese AI models.
Samsung Electronics and SK Hynix Record Sharp Declines from Year Highs
Jung stated in the report that Samsung Electronics and SK Hynix have fallen 34.8% and 40.9% respectively from their intraday highs this year. The analyst explained that the sharp stock declines occurred as concerns persisted about hyperscalers' return on investment compared to their massive capital expenditures, while last week saw increased focus on the strong cost-effectiveness of China's Moonshot Kimi3 model.
The analyst diagnosed that Samsung Electronics and SK Hynix will face difficulties reclaiming their status as market leaders. However, Jung determined that the stocks are worth buying at low prices given that valuations have fallen to historically low levels.
LS Securities Cites Low Valuations as Buy Rationale
Jung noted that overly detailed stock price path forecasts do more harm than good, stating that it is necessary to establish a basic scenario and respond to the market accordingly.
The analyst emphasized that Samsung Electronics and SK Hynix have 12-month forward price-to-earnings ratios of only 4.42 times and 4.73 times respectively. Jung stressed that even if earnings estimates for the two stocks were cut in half in an extreme scenario, the current stock prices would still be higher if their 12-month forward PERs rose to Samsung Electronics' long-term average of 10 times.
The analyst added that the stock price levels are excessively low even considering that Samsung Electronics and SK Hynix will be tested as market leaders in the second half of this year.
FAQ
Why did Samsung Electronics and SK Hynix stocks fall sharply?
According to LS Securities analyst Jung Da-woon's report issued on the 21st, the stock declines occurred due to persistent concerns about hyperscalers' return on investment relative to massive capital expenditures, with additional pressure from attention on China's Kimi3 model's strong cost-effectiveness highlighted last week.
What are the current valuations of Samsung Electronics and SK Hynix?
The report states that Samsung Electronics and SK Hynix have 12-month forward price-to-earnings ratios of 4.42 times and 4.73 times respectively, which the analyst characterized as historically low levels compared to Samsung Electronics' long-term average PER of 10 times.
