When it comes to the world’s second-largest maker of memory chips, analysts and short sellers are poles apart.
A week after a spike in bearish bets caused the South Korean stock exchange to halt short-selling of SK Hynix Inc, analysts remain universally positive, with all 42 of those tracked by Bloomberg having a “buy”-equivalent rating on the stock.
So far, the bulls appear to have the upper hand. Since sliding in the wake of the short-selling rush, caused by an upsized convertible-bond issue, the stock has rebounded. Rival Samsung Electronics Co’s announcement last week that it is cutting chip production further padded those gains, which now stand at 20 percent on the year.
Photo: Reuters
As more production is taken offline, it could eventually “help the entire chip industry,” Yuanta Securities Korea Co analyst Baik Gilhyun said.
Results due in two weeks are set to shed light on the industry outlook, which has been aided by Samsung’s production curbs. While the cuts should help accelerate the recovery in the memorychip market, some investors fret that SK Hynix might have to follow suit.
“The demand in the industry — PC and mobile — is not so favorable,” Midas International Asset Management Co cochief executive officer Shin Jinho said.
Weak demand has created a supply glut for memory chips that has depressed prices. The backdrop is not helped by a combination of rising interest rates, surging inflation and a banking crisis that have dented consumer sentiment.
On Monday, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) said it missed sales estimates for a second consecutive quarter — a sign of continued weakness in global electronics demand.
TSMC lost 0.76 percent yesterday, closing at NT$520 after falling 0.95 percent on Tuesday, a day after the chipmaker reported its first-quarter sales of NT$508.63 billion (US$16.67 billion), which fell short of its guidance of NT$512.69 billion to NT$537.25 billion.
Most analysts are bullish on SK Hynix given that the memory market is expected to recover in the second half of this year as inventory pressures ease, and cuts in production and capital spending limit supply.
Daishin Securities Co analyst Wi Minbok said that there is a high probability that memorychip prices will rebound in the second half of this year.
“And I believe there will be a shortage in 2024,” he said.
Yet the company looks to be facing a tougher road than others. For one, the Apple Inc supplier is expected to post a net loss in each quarter of the 2023 fiscal year, analyst estimates compiled by Bloomberg showed.
In contrast, Samsung and TSMC are set to stay in the black all year.
While SK Hynix’s shares have risen alongside technology stocks more broadly this year, they are still 38 percent below their 2021 peak as the company works through an outsized amount of inventory following its acquisition of Intel Corp’s flash memory business.
The stock is priced at 2.4 times sales projected over the next 12 months, greater than an average of 1.7 times over the past decade, data compiled by Bloomberg showed.
The key to the stock’s immediate performance is likely to be in the upcoming results announcement.
One should “pay more attention to further announcements on production cuts rather than short-term sluggish performance,” Baik said.
Additional reporting by CNA
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