Why Samsung Electronics’ share prices are performing weakly despite a decent Q1

Posted on : 2022-04-19 17:50 KST Modified on : 2022-04-19 17:50 KST
Fears of an economic downturn are leading to lower demand for upstream sectors like semiconductors
Models hold up Samsung Electronics’ new sound bar, which the company said on April 18 had been praised in foreign media. (Yonhap News)
Models hold up Samsung Electronics’ new sound bar, which the company said on April 18 had been praised in foreign media. (Yonhap News)

Worries have been growing among Samsung Electronics’ 5.6 million shareholders (as of late 2021) as the company’s stock prices continue to perform weakly despite better-than-expected figures for the first quarter of 2022.

On Monday, Samsung Electronics shares finished at 66,700 won on the KOSPI index, up by 100 won from the previous trading day. But during trading, it reached a new 52-week low of 66,100 won. Net sales by foreign investors continued for a 17th straight trading day.

Individual investors have been picking up what foreign investors and institutions have been selling off, with net purchases of over 9.2 trillion won in Samsung Electronics shares so far this year.

But the company’s share prices were down by nearly 15% compared with late 2021 — a far bigger drop than the 9.5% side for the KOSPI market over the same period.

It isn’t only Samsung Electronics' share prices that are slumping. Most of the world’s major semiconductor companies have been showing double drops in their share prices, as evidenced by the 23.3% dip in the PHLX Semiconductor Index so far this year.

Nvidia, which ranks first in the semiconductor industry for market capitalization, has suffered a steep 27.7% drop in 2022. Both the US company Micron Technology and Taiwan’s foundry heavyweight TSMC have seen their share prices tumble despite exceeding expectations with their recent first-quarter performance announcements.

The reason has to do with the increasingly negative demand prospects for semiconductors — an upstream industry — amid concerns of an economic slowdown. In particular, many are predicting a slide in semiconductor sales as personal computer and smartphone demand declines.

The market research firm Gartner reported that with remote education demand down, PC shipments had fallen by 7.3% in the first quarter compared with the same period in 2021. The investment bank Citi similarly predicted a rapid slowdown in the semiconductor market as PC demand falls.

Meanwhile, production of the major IT components that had powered semiconductor demand — including smartphones and machinery parts — has been facing setbacks due to lockdown measures in China. China accounts for 58% of global demand for semiconductors.

The continuing war in Ukraine has also been fanning anxieties over supplies. DRAM spot prices have been falling for the past seven weeks straight.

Some analysts predicted that the semiconductor cycle would not experience the same kind of rapid contraction as in the past. The US investment news source Barron’s anticipated growing demand for NAND memory amid a major increase in the importance of the automotive semiconductor industry.

“The volatility in the memory industry could be reduced as the current DRAM and NAND stockpiles dwindle to historic lows in the next three years,” said Kim Dong-won, an analyst with KB Securities.

While South Korean securities companies have been lowering their target share prices for Samsung Electronics, they are also predicting a rebound from the current levels.

“There’s a greater likelihood of share prices increasing, if you take into account variables such as the rise in NAND prices during the second quarter,” said Lee Seung-woo, an analyst at Eugene Investment & Securities.

Kim Seon-woo, an analyst with Meritz Securities, said, “With a full-scale recovery of Samsung Electronics’ operating profits expected to begin by the third quarter, we should see share prices start to rebound around the end of the second quarter.”

By Han Gwang-deok, finance correspondent

Please direct questions or comments to [english@hani.co.kr]

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