Samsung Electronics’ 4-yr low stock sparks investor concerns

On November 14, Samsung Electronics’ stock price closed at 49,900 won, marking a 1.38% drop from the previous day. This is the lowest closing price in four years and five months, since June 15, 2020. (Lee Chung-woo)

Investor anxiety is growing over Samsung Electronics Co., whose stock price has not been able to recover and has slumped to below 50,000 won ($35.6) for the first time in four years and five months.

Securities firms have cited competition from Chinese semiconductor firms as a primary risk, leading them to lower target prices once again.

Some equity-linked securities (ELS) tied to Samsung Electronics have already reached their knock-in thresholds, increasing potential losses.

While some analysts argue the drop is excessive given Samsung’s projected earnings next year and the possibility of passing high-bandwidth memory (HBM) testing, the foreign sell-off of shares has not abated, suggesting continued downward pressure.

To reflect the current market, some brokerages have adjusted target prices downwards, although they still remain significantly above the current stock price, at around 70,000 to 80,000 won.

Due to Samsung’s historical valuation and expected earnings, analysts find it difficult to set a target price below 60,000 won.

Mirae Asset Securities recently lowered its target for Samsung by 26,000 won to 84,000 won, while Kiwoom Securities set it at 70,000 won.

“The expansion of China’s CXMT may accelerate Samsung’s decline in LPDDR4 market share, which is contributing to the stock’s downtrend,” said Park Yoo-ak, an analyst at Kiwoon Securities. “Restoring core competitive strength in DRAM memory is essential.”

Kim Hyung-tae, a Shinhan Securities analyst, noted that “the stock’s recovery strength will depend on the performance contribution and penetration rate of HBM3E.”

Samsung Electronics’ decline below the 50,000-won level has also intensified concerns over losses in stock-linked ELS.

Typically, an ELS is structured to avoid losses unless the stock price drops approximately 50 percent from the issuance price.

If the price falls below the 40 to 60 percent knock-in threshold, the stock would need to recover to around 70 percent of the issuance price to prevent losses.

Given Samsung’s status as a national stock, numerous ELS products are tied to it.

In July, when Samsung’s stock reached its peak for the year, ELS tied to it reached an issuance volume of 26.6 billion won.

According to the Korea Securities Depository, the issuance prices for Samsung-linked ELS in July ranged from 73,500 to 87,600 won.

Of the 23 Samsung ELS issued in July, two issued by Yuanta Securities have already hit the knock-in threshold due to their relatively high 60 percent loss-trigger barrier.

Should Samsung’s stock decline further into the 40,000-won range, additional ELS with a 50 percent threshold may also reach knock-in status.

Additionally, two ELS from Hana Securities maturing in March next year will incur unavoidable losses unless Samsung’s stock rebounds to 74,000 won by that time.

Despite the decline, some analysts remain optimistic about Samsung’s prospects.

The stock’s price-to-book ratio (PBR) has fallen to 0.8 times, below its usual level of 1 to 1.1 times. Analyst Park noted that the potential delay in the launch of Nvidia Corp.’s Rubin equipped with HBM4 could offer Samsung an opportunity to narrow the technology gap.