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(News Focus) Macro conditions dim prospects for Samsung shares in near future

All News 17:02 April 19, 2022

By Woo Jae-yeon

SEOUL, April 19 (Yonhap) -- Samsung Electronics Co.'s estimate-beating earnings seem not to be enough to calm investors who remain wary over headwinds from rising inflation, rate hikes and geopolitical risks, analysts said Tuesday.

Shares of Samsung, the world's largest memory chip and smartphone maker, have tanked this year, even though the tech giant is likely to report its best first-quarter earnings in four years later this month, on the back of solid chip and mobile demand.

The South Korean tech giant estimated its operating profit at 14.1 trillion won (US$11.5 billion) for the first three months of the year, up 50.3 percent from a year ago.

Despite the rosy forecast, Samsung shares closed at 67,300 won Tuesday. In Monday's intraday session, Samsung shares dipped to 66,100 won, the sixth time this month that its shares renewed its 52-week low.

The tech giant's shares have declined some 15 percent since the start of this year, higher than the broader market's 9.5 percent retreat.

Foreign investors have been net-sellers, offloading 3.48 trillion won worth of Samsung shares year to date. They now own around 51 percent of Samsung shares, down from 56 percent early last year.

On the contrary, retail investors have gone on bargain hunting, seeing opportunities in the high-growth, but beaten-down stock. They bought 3.16 trillion won worth of Samsung shares for the first 15 days of this month.

This file photo, taken Aug. 10, 2021, shows the corporate logo of Samsung Electronics Co. at its office building in Seoul. (Yonhap)

This file photo, taken Aug. 10, 2021, shows the corporate logo of Samsung Electronics Co. at its office building in Seoul. (Yonhap)

"Bellwether Samsung shares cannot escape from the sell-off by foreign investors who are fleeing to safe assets from risky ones," Hyundai Motor Securities analyst Roh Geun-chang said.

The overall chip market faces negative sentiment from investors that the uptrend in the chip cycle might not continue due to the heightened risk of consumer spending decreasing.

Analysts forecast the chip growth to slow down in the coming months, as consumers, reeling from high inflation, started to cut back on their spending on non-essential items, such as consumer electronics and home devices.

"Slowdown in demand triggered by economic uncertainties, coupled with questions on when memory chip prices could rebound seem to weigh on Samsung shares," KB Securities analyst Kim Dong-won said.

Plus, Russia's war in Ukraine and China's recent lockdowns in major cities to stem the spread of the coronavirus have added to the woes of already fragile global supply chains.

Given the murky outlook, analysts have recently revised down the price targets for Samsung.

Earlier this month, Hi Investment & Securities reduced the price target from 93,000 won to 89,000 won. Hana Financial Investment took down its price target from 101,000 won to 95,000 won.

Analyst Song Myung-seop from Hi Investment said the market was losing its confidence that demand for chip and IT products would pick up in the second quarter.

Share prices are unlikely to advance to upward of 80,000 won, he said, "unless inflationary pressure is lifted and there are more dovish monetary policies."

"It seems hard to dissipate uncertainties hanging over the war, inflation and China's COVID-19 lockdowns all at once," Lee Seung-woo from Eugene Investment & Securities said.

"But there are chances that the stock could rebound if any one of the situations show signs of improving."


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