Roller-coaster stock price… Why forecasts of “Still heading to 200,000 won per share” are emerging

On the 8th, Samsung Electronics fell more than 1.5%. Even so, the securities industry is projecting ample upside potential for the stock. Some global investment banks (IBs) have raised their target price for Samsung Electronics to as high as 200,000 won.

That day, Samsung Electronics ended trading at 138,800 won, down 1.56%. After rising for seven consecutive sessions through the previous day, the rally paused. The stock swung wildly throughout regular trading. It dropped nearly 2% shortly after the open, but later saw bargain-hunting demand step in and at one point in the afternoon it rose nearly 2.5%. However, after 2 p.m., a wave of profit-taking selling hit and it closed lower.

The fourth-quarter earnings release that day served as the catalyst for the decline. Operating profit for the fourth quarter of last year came in at 20 trillion won, beating the brokerage consensus (average estimate, about 18.5 trillion won). However, the analysis is that expectations had ramped up sharply ahead of the release—some brokerages had put forth fourth-quarter profit estimates of 21.4 trillion won. In the market, a so-called “street consensus” (an outlook formed in the market separate from official reports) had taken shape that “fourth-quarter operating profit could exceed 21 trillion won.” Lee Jaewon, an analyst at Shinhan Investment Corp., said, “The impact came from the announced operating profit falling short of the street consensus priced in by the market.”

Even so, the prevailing view is that the stock’s decline is likely a short-term adjustment. With memory chip prices expected to surge in the first quarter as well, rosy forecasts are emerging that Samsung Electronics’ first-quarter results will set a new record high. KB Securities estimated that after server DRAM prices rose 45% quarter-on-quarter in the fourth quarter of last year, they would jump another 70% in the first quarter. The consensus for Samsung Electronics’ first-quarter operating profit stands at 22.8178 trillion won, but estimates are being revised higher rapidly, with some domestic brokerages such as DB Financial Investment forecasting as much as 30.5 trillion won. Kim Dongwon, head of the research center at KB Securities, said, “Samsung Electronics, the world’s largest server DRAM producer with monthly output of 350,000 wafers, will be a direct beneficiary of the sharp rise in memory chip prices.”

Target prices are also being raised in succession. On the 5th, Citigroup raised its target price for Samsung Securities from 170,000 won to 200,000 won. Citigroup said, “This year, Samsung Electronics’ net profit will reach 112.2 trillion won and earnings per share (EPS) will surge 182% from a year earlier,” adding, “Return on equity (ROE) will also rise to 23.7%, and the share price will continue its upward trend.”

Simseongmi Shim smshim@hankyung.com