Why is Samsung Electronics stock sliding today?

Samsung Electronics and SK hynix are expected to post record Q3 operating profits, driven by high memory demand and supply shortages. Samsung's profit is estimated at 111.38 trillion won, up 815.47% YoY, while SK hynix's profit is forecast at 78.13 trillion won, up 586.34% YoY. Both companies are focusing on HBM for AI semiconductors, exacerbating general-purpose DRAM shortages.

South Korea's KOSPI index fell below 7,000 after the Chuseok holiday, driven by selling from foreign and institutional investors, particularly in semiconductor stocks like Samsung Electronics and SK Hynix. The index dropped 1.16% to 6,998.62. Samsung Electronics shares declined 2.10%, while SK Hynix fell 2.69%. Other sectors showed mixed performance, with chemicals and telecommunications gaining. The KOSDAQ index rose 1.88% to 860.39.

An FDA panel recommended approval for Grail's Galleri multi-cancer early detection test, bringing it closer to premarket approval. Samsung Electronics (005930) and Samsung C&T (028260), which invested $110 million in Grail, may benefit. The test, currently priced at $940, could expand market access if approved. Grail reported $136.8 million in U.S. revenue last year.

Samsung Electronics forecasts Q3 revenue of ₩200.279 trillion and operating profit of ₩106.9887 trillion, more than double last year's annual profit. The memory division, particularly DRAM and NAND, is driving this growth, with price increases and high profitability. HBM4 mass production is boosting competitiveness, while non-memory sectors face deficits.

Analysts at Yuanta Securities and Kiwoom Securities issued diverging target prices for Samsung Electronics (005930) after its Q3 earnings. Yuanta raised its target to 630,000 won, citing a prolonged upcycle, while Kiwoom maintained its target at 350,000 won, forecasting a decline in memory chip prices. Both agree on Q3 earnings but differ on 2024 outlooks, with Yuanta projecting a 65% increase and Kiwoom a 5% decline in operating profit.

Samsung Electronics is projected to report a record quarterly operating profit of 107.7 trillion won, a 20.3% increase from the previous quarter, according to analysts. The company's semiconductor division is expected to achieve a 72–75% operating margin, with DRAM margins potentially exceeding 80%. TrendForce forecasts a 13–18% rise in DRAM prices for the third quarter.