SK Hynix Inc. shares fell more than 4 percent to a three-month low after Morgan Stanley double-downgraded its opinion on the South Korea’s second largest chipmaker upon further conviction of the boom cycle coming to an end.
The investment bank released a report on Monday that it revised down its view on SK Hynix by two notches from ‘overweight’ to ‘underweight’ with a price target of 71,000 won ($63), saying that chip prices would be going down. It also rated SK Hynix the ‘least-preferred’ company among global chipmakers.
Shares of SK Hynix plunged Monday by 4.68 percent to close at 79,400 won, falling below 80,000 won for the first time in three months. They closed Tuesday up 1.64 percent at 80,700 won.
The report said DRAM would end its supply shortage cycle around the fourth quarter and enter a bearish market next year. The supply glut of NAND flash memories would also continue, which is expected to drive down the prices faster than production cost in the third to fourth quarter, it added.
Following the release of the report, foreign investors dumped 145.3 billion won worth SK Hynix shares on Monday. Institutional investors net sold 73.3 billion won worth stocks.
In November last year, Morgan Stanley cut its rating on Samsung Electronics Co. from ‘overweight’ to ‘equal weight’ after warning that the chip market would soon enter a down cycle, and lowered its target price from 2.9 million won to 2.8 million won. Shares of the world’s largest chipmaker took a dive by losing more than 5 percent on the day the report was released.
In the end of last month, SK Hynix announced fresh record high quarterly earnings for the second quarter thanks to unfazed demand for its mainstay DRAM chips. Its operating profit for the quarter ended June was a record 5.57 trillion won, well above the market consensus of 5.23 trillion won, on sales of 10.4 trillion won, higher than the market expectation of 10.1 trillion won.
Buoyed by the stellar performance, the company said it will keep up spending in facility investment in the second half of this year after spending 8 trillion won in the first half.
By Kim Je-rim and Choi Mira
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