Samsung Electronics Drops 12.7% in Two Days After Record Profit. Is It Time to Buy?

“More Upside” vs. “Fading Momentum”: Samsung Electronics Outlook Splits

“No Panic Selling, Conditional Buying in Tranches”: Signals Retail Investors Should Watch

Investor confusion is deepening after Samsung Electronics Co. tumbled for a second straight day despite posting record earnings. The company reported preliminary second-quarter operating profit of 89.4 trillion won, a quarterly record that topped market expectations, but the stock fell nearly 7% on the day of the earnings release and slid another 6% the following day.

Market attention has been intense. Twelve brokerages published reports on July 8 alone, a day after Samsung released its second-quarter results on July 7. Views on the stock’s next move are split. Analysts advise investors to respond in stages while tracking key signals, including whether artificial intelligence spending remains intact and whether foreign investor selling begins to ease.

“More Upside” vs. “Fading Momentum”: Samsung Electronics Outlook Splits

Samsung Electronics closed the regular session down 6.25% at 277,500 won on July 8. That followed a 6.92% drop on July 7, marking a second straight day of declines. Earlier, Samsung reported preliminary second-quarter consolidated revenue of 171 trillion won and operating profit of 89.4 trillion won. Operating profit exceeded the market consensus of about 85 trillion won.

The selloff despite strong earnings prompted a flood of brokerage analysis. Price targets in reports published on July 8 ranged from 360,000 won to 600,000 won, a spread of 240,000 won.

The mainstream view is that the latest decline does not yet signal a peak in the semiconductor cycle or in earnings. But analysts are divided on whether the stock can regain its previous momentum even if strong results continue. Some expect further gains, citing a prolonged shortage in memory supply. Others say investors should be wary of a higher earnings base, slower profit growth and pressure from foreign selling.

The most bullish case still rests on tight memory supply. Estimates cited by analysts show D-RAM and NAND production capacity rising just 7% and 4%, respectively, in 2027, while demand increases 17% and 19%. That would deepen the supply shortfall.

Kim Dong-won of KB Securities wrote that recent concerns over AI amount to little more than noise. Competition to secure memory supply will likely intensify in the second half, he added. Kim set the highest target price on Samsung Electronics at 600,000 won.

Others argue the market has already moved on to the next quarter. Consensus estimates call for Samsung’s operating profit to reach 110 trillion won in the third quarter and 120 trillion won in the fourth quarter. Even after the strong second quarter, that implies earnings would still need to rise another 10% to 20%.

Noh Dong-gil of Shinhan Securities said strong earnings expectations have only raised the bar for the next quarter. The picture becomes even more complicated when investors extend their time horizon to the year after next and ask whether AI capital spending will keep growing and whether memory supply-demand conditions and margins will hold up after new fabrication plants begin operations.

Some analysts say investors should distinguish between the absolute size of earnings and the pace of growth. Profit may continue rising through next year, but the year-over-year growth rate may already have passed its peak.

Byun Jun-ho of IBK Securities said Samsung Electronics and SK Hynix Inc. are likely to post steadily improving results through the second half and into next year. But indicators such as margins and the rate of earnings growth are more likely to turn lower. In past years when operating profit growth peaked for Samsung Electronics and SK Hynix — including 2017, 2021 and 2024 — foreign investors were net sellers in the second half, he said.

“No Panic Selling, Conditional Buying in Tranches”: Signals Retail Investors Should Watch

Analysts say retail investors should respond gradually while checking key indicators. Uncertainty remains over whether AI spending will continue, but there are still no clear signs that industry fundamentals have deteriorated.

Lee Jae-won of Yuanta Securities said the key question now is not whether investors should sell semiconductor stocks, but whether AI capital spending has actually begun to weaken. So far, what has been confirmed is not damage to fundamentals, but pressure from elevated expectations and a shock to supply and demand.

His strategy is not panic selling, but conditional buying in tranches. Because retail investors’ capacity for additional net buying has weakened, he said investors should watch over several trading days to see whether the scale of daily net foreign selling declines on a sustained basis.

Lee also cited second-quarter earnings from major cloud companies due at the end of July as a key variable. AI capital spending guidance from hyperscalers, or operators of large data centers, needs to be maintained or raised in those results, he said, adding that he sees a low chance of downward revisions to capital spending.

He also laid out the downside scenario. If hyperscalers cut capital spending guidance, renegotiate long-term supply contracts, delay HBM certification or show slower server D-RAM price growth, investors should shift their view from a temporary supply-demand adjustment to damage to the cycle, Lee said.

Kim Yeon-ji, Hankyung.com reporter kongzi@hankyung.com