Close-up of sign with logo at the regional headquarters of technology company Samsung in the Silicon … [+]
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Samsung Electronics published a solid set of Q3 2021 results last week as it continued to benefit from strong pricing and demand in its semiconductor business. Revenues rose by about 10% year-over-year to around 73.98 trillion won ($63 billion) and net profit jumped 31% to 12.29 trillion won (about $10 billion), amid strong demand and pricing trends in the memory market and the ongoing semiconductor shortage. However, Samsung stock continues to underperform, remaining down by about 4% over the last month and around 25% year-to-date. So what’s weighing Samsung stock down and is the stock a buy at current levels?
While Samsung’s memory business has been faring well, with sales rising by almost 46% year-over-year in Q3, driven by demand from the server market and stronger pricing trends, investors fear that the DRAM prices – which is the primary driver of Samsung’s memory profits – could be peaking. For example, the memory market tracker, TrendForce, indicated that the average contract price of 8-gigabit DDR4 PC DRAMs fell by almost 10% over the last month. Moreover, Samsung’s smartphone business is also seeing some headwinds amid the component shortage, while its appliance business – which has been a big growth driver in recent quarters, could see sales cool off.
However, we still think Samsung stock is worth considering. The stock trades at about $1,495 per share or just a little over 11x our projected 2021 earnings for the company. While this is partly due to the inherent cyclicality of the memory market, we think there are a couple of longer-term trends that could help Samsung. Firstly, semiconductor and memory intensity in computing and consumer electronics products is only likely to rise in the longer term, driven by the continued migration to cloud computing and 5G smartphones that will drive memory demand. Moreover, Samsung is seen as a leader in advanced process technologies in memory products and this could help its margins. The company has been expanding mass production of 14 nm DRAM and 176-layer V-NAND. Samsung’s next-gen foldable smartphones have also seen a strong response and it’s likely that they could help to drive growth in the coming years. We value Samsung stock at about $1700 per share, marking a 14% premium over the current market price. See our analysis on Samsung Valuation: Expensive or Cheap for more details.
[9/7/2021] Down 14% This Year, Is Samsung Stock A Buy?
Samsung Electronics’ stock (LSE: SMSN) has declined by almost 14% year-to-date and currently trades at levels of around $1,660 per share. There are likely a couple of factors driving the decline. Although Samsung has been a big beneficiary of the surging demand and stronger pricing for chips through Covid-19, with its stock gaining close to 50% over the last year, investors likely anticipate that the memory boom is peaking, as inventory levels improve and as demand driven by the work from home trend likely fades. The chip operations rank as Samsung’s most lucrative business accounting for over 50% of Samsung’s operating profit in Q2. Separately, Samsung’s smartphone business has also seen sluggish growth, as it is weighed down by the component supply shortage. That being said, we think Samsung stock remains undervalued at …….