Morgan Stanley slashes price targets for Samsung Electronics, SK hynix

Bank maintains positive near-term earnings outlook

Samsung Electronics' headquarters in Seocho, Seoul, and SK hynix's main campus in Icheon, Gyeonggi Province. [Yonhap]
Samsung Electronics' headquarters in Seocho, Seoul, and SK hynix's main campus in Icheon, Gyeonggi Province. [Yonhap]

Morgan Stanley has raised its earnings outlook for Samsung Electronics and SK hynix for next year, even as the global investment bank sharply cut its price targets for both chipmakers, citing the risk of a profitability squeeze from a supply surge after 2028.

While the memory chip boom driven by AI investment continues, the bank warned that new production facilities coming online from late 2027 could make it difficult to sustain current high profit margins.

In a report titled "Memory Semiconductors — Key Issues After the US Midterm Elections," released Monday, Morgan Stanley analyst Sean Kim cut his price target for Samsung Electronics by 19%, to 309,000 won ($228) from 381,000 won, according to Yonhap.

The target for Samsung Electronics preferred shares was also lowered, from 304,800 won to 247,200 won.

For SK hynix, the cut was steeper — the price target was slashed 38%, to 1.6 million won from 2.6 million won.

Kim is known in South Korea as the "semiconductor grim reaper" for a string of earlier reports warning of a downturn in the chip sector. His latest move has renewed that attention.

"The most important debate in the memory chip market right now is whether a 2028 earnings cliff can be avoided," Kim said in the report. "Concerns are growing not so much about next year's earnings themselves, but about whether growth can be achieved and sustained beyond 2028."

Kim particularly flagged the risk that new production facilities beginning operation from late 2027 will expand semiconductor supply at a time when the pace of AI data center construction may be slowing.

The report also identified expanding production by Chinese chipmakers and intensifying competition in the HBM market as factors that could weigh on long-term profitability.

Morgan Stanley cut its forecast for SK hynix's HBM operating profit margin in 2027–2028 to around 70% from a previous range of 78–80%. Its outlook for Samsung Electronics' HBM operating profit margin was also trimmed, to 65–72% from around 80%.

On near-term performance, however, the bank remained upbeat. Morgan Stanley raised its operating profit forecast for Samsung Electronics for next year by 9%, to about 688 trillion won. Its forecast for SK hynix's operating profit next year was lifted 13%, to about 468 trillion won.

Morgan Stanley earlier called US stocks a buying opportunity

This image is unrelated to the article. [123RF]
This image is unrelated to the article. [123RF]

Earlier, Morgan Stanley had predicted that the US stock market could see temporary pullbacks from several "correction events," but that investors should view such dips as good entry points.

Bloomberg reported Nov. 1 (local time) that Morgan Stanley's chief US equity strategist Mike Wilson made the remarks in an interview with the outlet.

Wilson said midterm elections had always been a hurdle for markets, but that the data showed a 100% probability of stocks rising in the six months to one year following midterm elections.

On concerns that large-scale share issuances and initial public offerings by Meta Platforms, SpaceX, Anthropic and others could create an oversupply of equities, Wilson said the real economy was absorbing vast amounts of capital "like a sponge," with US nominal GDP growth running as high as 7.5%. He added that companies were issuing shares to fund actual spending on infrastructure and the like, rather than for financial engineering, which he saw as a sign of genuine growth potential.

Asked whether the current environment resembled the indiscriminate share issuance of the dot-com bubble era, Wilson said the market was "well able to absorb fundraising by AI companies" and was already demanding higher risk premiums from weaker firms. He added that companies were striking a balance between issuing shares and bonds, and that even with elevated interest rates, large blue-chip companies had ample room to grow.


yul@heraldcorp.com