Samsung Electronics Co. shares took their biggest daily dive in more than a year by losing 5 percent on Monday after a downgrade by Morgan Stanley splashed cold waters on hyped prospects about the world’s biggest chipmaker benefiting from explosive memory demand.
The investment bank in a report issued on Sunday revised down its view on Samsung Electronics from overweight to equal weight, pointing to the overshooting in the stock that had gained 120 percent since January of last year versus the 30 percent rise in the broader Kospi. The bank advised “time for pause” warning of fizzling out in semiconductor boom.
It brought down its price target from 2.9 million won ($2,666.91) to 2.8 million won.
Samsung Electronics’ shares closed Monday down 5.08 percent at 2,632,000 won, its biggest daily fall after 8.04% on Oct. 11, 2016, bringing the Kospi down 1.44 percent to 2,507.81.
Shawn Kim, Morgan Stanley analyst, maintained a positive opinion in the Korean tech giant’s performance and management but warned that NAND chip prices would start falling fast as the market has already entered a down cycle. The DRAM chip super cycle of tight supply and strong demand would also start weakening after the first quarter of next year, he predicted.
Increased supply could put a downward pressure on component prices and lower the profit margins that are near their record high, Kim said, adding that lackluster performance in Samsung Electronics’ memory unit next year may pull down its share price.
The mobile and home appliances units are steady cash cows for the company but growth in the smartphone business would be limited as the industry has moved into the mature stage, he said.
By Yoon Jin-ho and Kim Hyo-jin
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