Nomura Sees Samsung, Hynix Severely Undervalued

On September 4, global investment bank Nomura analyzed that the stock prices of memory companies, including Samsung Electronics and SK hynix, are currently undervalued, stated CW Chung, a Nomura researcher. The investment bank maintains its Buy rating for both Samsung Electronics and SK hynix, with target prices set at 670,000 won (~$496) for Samsung and 4,700,000 won (~$3,481) for SK hynix.

Chung explained that despite a 50% drop from their peak prices, the memory companies' stocks are still 37% below their previous peaks. He also highlighted an expected price-to-earnings (P/E) ratio of around 3 times by 2027, indicating significant undervaluation compared to strong memory demand and limited supply growth.

Concerns about Chinese memory companies expanding their market share were addressed by Chung, who noted that while Chinese firms are aggressively increasing their production capacity, their ability to further grow output until 2028 is limited. He added that memory companies continue to warn of a severe supply shortage, forecasting that long-term agreements (LTAs) will reshape the industry into a more stable business model.

Chung emphasized that customers facing memory shortages must either reduce memory capacity per product, risking performance, or limit finished product production due to insufficient allocated memory volume. Despite the burden of increasing memory prices, customers are accepting many unfavorable LTA conditions amid the supply shortage situation.