2 million won per share evades Samsung

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2 million won per share evades Samsung


Will a share of Samsung Electronics hitting 2 million won ($ 1,738) forever be a golden fleece?

This is a hotly debated topic among analysts at securities firms who had optimistic outlooks for the world's largest chip maker.

A leading securities firm, Korea Investment & Securities, Tuesday lowered its target price for the end-of-the-year share price for Samsung to 1.7 million won from the 1.95 million won it predicted in April as Samsung's shares get hammered by the crashing waves sloshing onto the local market from the euro zone crisis.

Yesterday, shares of Samsung closed at 1.25 million won, up 0.64 percent from the previous trading day.

In March, Korea Investment & Securities set a target price for Samsung shares at 1.65 million won, slightly up from the 1.5 million won it set in January.

Other securities firms that were steadily raising Samsung's target price have changed course and lowered their expectations.

"We lowered the target share price for Samsung Electronics because demand for chips shrank due to the fiscal crisis in Europe and evaluations of Samsung's rivals have fallen as well," said Seo Won-seok, an analyst at Korea Investment & Securities.

Seo lowered both the target share price as well as his earnings forecast for the maker of Galaxy smartphones and tablets.

He also revised downward his outlook for Samsung's second quarter sales to 49.2 trillion won from 50.4 trillion won.

The forecast for operating profits in the same period also was ratcheted down to 6.6 trillion won from 7.1 trillion won.

Toyang Securities, which previously gave the brightest outlook for Samsung by setting its target share price at 2 million won, also lowered its outlook for operating profit to 7.7 trillion won, 6 percent down from 6.7 trillion won.

Although the local currency lost value against the U.S. dollar and didn't negatively affect sales of tech exporter shares like Samsung, the slowdown for memory chip sales was greater than the currency impact, market analysts said.

"Prices of DRAM and NAND flash memory went down significantly in the first quarter and DRAM's cost cutting efforts fell short of our expectations," said Park Hyun, an analyst at Tongyang Securities.

Samsung's shares were selling for 140 million-something won at the end of April, giving rise to some hopes for a breakthrough of the 2 million won level.

Although Korea Investment and Tongyang lowered their outlook for Samsung's shares, they still kept a buy recommendation.

Although market analysts are divided over Samsung's outlook, there are still more analysts who sided with the positive outlook.

In a recent meeting with institutional investors, Samsung lowered its guidelines for sales reflecting the overheated market's anticipation.

"[Investors'] overheated mood for buying Samsung's shares cooled down a bit, as they are reacting cautiously to Apple's expected release of the iPhone 5, which is slated for the second half of this year," said Yang Hae-man, an analyst at NH-CA Asset Management. "When dealing with Samsung shares, a long-term approach is needed. We haven't slashed the ratio of Samsung shares under our managed funds because we forecast they will surpass the previous record in the fourth quarter."

By Kim Soo-yeon [mijukim@joongang.co.kr]

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