Brokerages slash price targets for Samsung Electronics, SK hynix despite solid Q2 results

South Korean listed companies posted stronger-than-expected second-quarter earnings, yet brokerages have grown more cautious. As analysts shift focus from current results to future industry conditions and valuation concerns, research notes cutting price targets last month outnumbered those raising them by nearly two to one.

According to FnGuide, domestic brokerages issued 580 price-target downgrade reports in July, compared with just 351 upgrades over the same period.

It was the first time downgrades outnumbered upgrades in roughly 15 months, since April last year. In July last year, upgrades totaled 1,168 against only 180 downgrades, and optimism had prevailed well into this year — January saw 940 upgrades versus 228 downgrades, and February recorded 1,122 upgrades against 116 downgrades.

The mood shifted in July as market volatility increased and a wave of reports reassessed corporate earnings forecasts and valuations. Price targets are generally raised when earnings improvements and higher valuations look likely, and cut when profit estimates fall or valuation pressures mount.

Samsung Electronics and SK hynix are the most prominent examples. Both companies posted solid second-quarter results, but brokerages have been trimming their price targets as the memory chip industry outlook darkens and uncertainty around AI investment grows.

NH Investment Securities cut its price target for SK hynix from 4.1 million won ($2,870) to 3.4 million won, while Daishin Securities lowered its target from 3.9 million won to 3.2 million won. Samsung Securities reduced its target from 3.5 million won to 3 million won, and Mirae Asset Securities made a sharper cut, from 4.2 million won to 2.8 million won. Some analysts say the adjustments reflect more conservative earnings forecasts and an effort to narrow the gap with recent share price movements.

However, most brokerages that cut their price targets maintained "buy" recommendations. The spread between individual firms' targets remains wide. For Samsung Electronics, the highest target among recently issued reports stood at 650,000 won and the lowest at 360,000 won — a gap of 290,000 won. SK hynix showed an even wider range, with targets spanning from a high of 4.7 million won to a low of 1.48 million won.

Eugene Investment & Securities kept its top-tier "strong buy" rating on Samsung Electronics. Analyst Son In-jun, commenting on Samsung's conference call, said the company had outlined long-term supply agreement volume targets larger than expected. He added that share buybacks to fund employee bonuses would help stabilize supply and demand among memory chipmakers, which have seen extreme volatility recently, and support a recovery in the share price.

Views on SK hynix are more cautious in some quarters. BNK Investment & Securities analyst Lee Min-hee said demand momentum had already peaked while companies were still aggressively expanding capacity, raising the risk of a future supply glut. Lee added that the planned listing of China's CXMT at the top of the industry cycle could further intensify competition.

Brokerages identify semiconductor industry conditions and the sustainability of AI investment as the key variables shaping market direction in the second half of the year. With US big-tech capital expenditure plans, global interest rates and geopolitical factors all in play, assessments of future growth potential — rather than current earnings — are likely to drive market sentiment for now, some analysts say.

Na Jeong-hwan, an analyst at NH Investment Securities, said chipmakers' operating profit levels would rise in a step-by-step pattern quarter by quarter through next year, meaning share prices would ultimately rebound on the basis of absolute profit levels rather than growth rates.

Lee Gyeong-min of Daishin Securities said the key to any rebound was an easing of concerns about slowing AI investment. "If tangible profitability gains from AI adoption are confirmed, that would serve as a powerful trigger for a sharp market turnaround," he said.

Some in the brokerage industry argue that long-term earnings and competitive strength matter more than short-term price-target adjustments as investment criteria. For now, the factors most likely to drive market sentiment are not the targets themselves, but how stable earnings estimates prove to be and how much of the uncertainty surrounding AI and the semiconductor industry gets resolved.