"Samsung Electronics Upgraded Again"... Why Earnings Expectations Keep Rising [Stock Spotlight]

[Financial News] As memory semiconductor prices are rising faster than expected, Samsung Electronics' earnings outlook for this year has been revised upward once again. Although the stock has recently undergone a short-term correction, analysts said the strong memory market is likely to continue through 2027, keeping the medium- to long-term improvement in earnings intact.
On the 3rd, iM Securities raised its forecast for Samsung Electronics' operating profit in the second quarter of this year from 7.61 trillion won to 8 trillion won. It also lifted its full-year operating profit estimate from 34 trillion won to 36 trillion won, while maintaining its investment rating of "buy" and its target price of 480,000 won.
Song Myung-seop, an analyst at iM Securities, said, "We estimate that the average selling price (ASP) of DRAM rose by more than 40% in the second quarter, while NAND flash memory ASP increased by the mid-60% range." He added, "In the third quarter, DRAM and NAND ASPs are also likely to rise an additional 15% to 20% each. The pace of memory price increases is exceeding earlier expectations."
The memory business is expected to drive Samsung Electronics' performance this year. Song estimated operating profit from the memory semiconductor division at 7.92 trillion won in the second quarter. He said total operating profit for the company is expected to be around 8 trillion won because of a one-time provision for employee performance bonuses in the semiconductor division. Without that cost, operating profit from the memory business would have reached 9.49 trillion won.
By contrast, operating profit at the display (SDC) and Mobile eXperience (MX) and network divisions is expected to shrink to around 200 billion won and 1 trillion won, respectively, due to rising costs from surging memory prices. The foundry division is expected to narrow its losses slightly.
Song said, "As the production growth rate in the DRAM industry slows from 25% this year to below 20% in 2027, Big Tech companies are expected to continue investing in artificial intelligence (AI) data center projects by using capital increases, special purpose vehicles (SPV), and joint ventures (JV), even amid cash shortages." He added that the memory market is likely to remain in a boom cycle at least through 2027.
He also pointed to the possibility of a valuation re-rating. Samsung Electronics' expected return on equity (ROE) this year is estimated at about 49%, which would exceed the 41% recorded in 2000, the highest level in the past 30 years. However, Song added, "If geopolitical risks such as the Iran war recur and drag on, stagflation, tighter liquidity, and a slowdown in AI investment could emerge at the same time, affecting both the memory market and valuations."


dschoi@fnnews.com Choi Du-seon Reporter