On Tuesday analysts are bullish on Samsung after the company unveiled a foldable phone and United States semiconductor company Nvidia said its next-generation gaming chip will be manufactured by the South Korean electronics giant.
They see Samsung’s shares trading at 70,376.32 Korean won ($59.35) in the next 12 months. That represents a 29% upside from Wednesday’s trading price, according to an average target price collated by Refinitiv.
Some analysts are even more bullish on Samsung. Daiwa Capital Markets’ SK Kim has a 12-month price target of 82,000 Korean won, a more than 50% rise from Wednesday’s trading price. New orders for Samsung’s chip manufacturing operations or foundry, next-generation smartphone launches and a recovery in memory pricing next year are factors behind the analysts’ optimism.
“For SEC (Samsung Electronics), we maintain our positive view as we expect a favourable memory market environment in 2021, new foundry opportunities and attractive valuation compared with its peers such as TSMC,” Kim told CNBC in an email.
On Tuesday, Nvidia launched the GeForce RTX 30 Series of graphics processing units (GPUs). The chips are designed for PC gaming and promise to offer more realistic images on screen, thanks to so-called “ray tracing.” This technology simulates how light reacts with objects around it.
Nvidia chose Samsung to manufacture the chips using a so-called 8 nanometer process customized for these semiconductors. The move was seen as positive for Samsung. Daiwa’s Kim expects the Nvidia deal to be worth $1 billion in revenue for Samsung.
Samsung’s semiconductor business is very important for the company. It includes the foundry business as well as the sales of so-called NAND and DRAM chips Samsung produces, which are used in devices such as laptops and smartphones, through to data centers. Semiconductors accounted for two-thirds of Samsung’s operating profit in the second quarter of this year.
DRAM pricing, which has been under pressure in the second quarter, is expected to face further weakness for the rest of the year, according to a note released by UBS last week. The investment bank sees DRAM prices falling 8% quarter-on-quarter in the third quarter of this year.
But the start of 2021 could bring a recovery. “First, we continue to expect DRAM pricing to start to recover in 1H21 as industry supply growth will not match demand when smartphones demand is closer to normalized levels,” UBS said, referring to the first half of next year.