No Respite Seen for Korean Chip Giants as Analysts Slash Targets

(Bloomberg) -- The world’s two largest memory-chip makers are wrapping up a brutal year with yet more damming news as analysts slash further their earnings prospects and price estimates.

South Korea’s NH Investment & Securities reduced on Monday its target on SK Hynix Inc. by 15 percent to 85,000 won ($75.16), citing a worse-than-expected decline in prices of dynamic random-access memory, or DRAM. The brokerage sees first-quarter operating profit dropping 21 percent from a year earlier on weak demand and seasonal factors. Eugene Investment also lowered its price target by 15 percent, noting that earnings momentum will be weak until the first half of next year.

The series of cuts follow similar moves by analysts covering Samsung Electronics Co., the largest maker of memory chips. Operating profit at the Suwon-based behemoth will likely be 13.9 trillion won in the fourth quarter, NH Investment & Securities’ Doh Hyun-Woo wrote in a note last week, missing “significantly” his previous estimate. He lowered the shares’ price target by 10 percent to 54,000 won. Shinhan Investment and Korea Investment & Securities had the same move, cutting their stock projections 5.3 percent and 11 percent, respectively.

Samsung shares, which have suffered since January from slowing demand for smartphones and components, are down 23 percent, poised for their worst year since 2000, when the industry was thrust into a dot-com bubble crash. SK Hynix, Samsung’s smaller hometown rival, is down 19 percent in 2018 and set for its steepest annual drop since 2015.

Shares of both Samsung and SK Hynix rebounded slightly on Monday after dropping 4.9 percent and 7.5 percent respectively last week. All of the brokerages mentioned still maintained their buy ratings on the stocks.

--With assistance from Cecile Vannucci and Shinhye Kang.

To contact the reporter on this story: Min Jeong Lee in Tokyo at mlee754@bloomberg.net

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Cecile Vannucci

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