What’s Going on With Samsung Stock?

Samsung Electronics reports a massive 1458% increase in operating profit, driven by strong AI demand and semiconductor sales. Discover how this impacts their future outlook.

Samsung’s earnings report

Samsung Electronics Co. released earnings that beat analysts’ expectations. The company’s operating profit soared by 1458% due to upbeat AI demand, and its net income growth saw the fastest rise since 2010.

Analysts expected the company to post revenue of around 73.74 trillion won, whereas the original figures came out at 74.07 trillion won ($53.45 billion). The quarterly revenue increased 23.42%.

Meanwhile, operating profit increased 1458%. Sales saw a boost from conventional memory and expanding AI investments, along with an uptick in dynamic random access memory. The company will pay a dividend of 361 won ($0.28) per common and preferred share for Q2.

The company’s net income increased sixfold to 9.64 trillion won ($7.52 billion). Most of the gain came from semiconductors, which brought 6.45 trillion won (about $5.03 billion).

Sales of microchips that help in energy conservation and support higher processing speed for AI also increased by 50% compared to the previous quarter.

According to the company’s report, demand for server applications was also strong, and the firm bolstered its position in the?DDR5 market by mass-producing?128GB products.

Samsung expects AI servers to capture the most significant chunk in the second half 2024. It is already working on high-density products such as 1b-nm 32GB DDR5.

Samsung’s foundry business also saw growth. The demand for sub-5nm technology and high-performance computing (HPC) increased twofold compared to last year. The foundry business is expected to expand HPC orders with a fourfold increase in customers and a ninefold increase in sales by 2028.

Samsung SDI Earnings

A day before its earnings, the company’s division that deals with renewable energy and energy storage systems also posted its results.

Samsung SDI reported a revenue of 4.45 trillion KRW (approximately $3.47 billion) and an operating profit of 280.2 billion KRW (about $219.56 million), which is a 24% decline in revenue on a YoY basis and a 13% fall in QoQ. The operating profit, an important metric, decreased by 38% vs last year.

The Energy Storage System (ESS) part posted improved results due to increased sales of Samsung Battery Box (SBB) and UPS (uninterrupted power systems), further bolstered by the rise in AI and advocacy for renewable energy.

The company’s Electronic Materials section saw a 1% increase in YoY revenue at 577 billion KRW (approximately $450.06 million), while operating profit edged to 72.2 billion KRW (about $56.32 million).

Samsung and Competitors

In positive news, the company recently won Nvidia’s approval to make high-bandwidth memory chips named HBM3 for its H20 chip. By November 2024, it anticipates receiving certification for an even more advanced version called HBM3E. As per Morgan Stanley, the sales of HMB chips are expected to increase to $71 billion in 2027 from $4 billion in 2023.

However, the company also estimates an 11% fall in the supply of these chips, with the overall DRAM market supply shrinking by 23%. As a result of declining demand for consumer electronics, supply chain disruptions, and economic uncertainties, Samsung shares have been declining since the report. On August 5, they were down 11% in the recent five days.

However, sales can increase if Samsung Electronics Co. gets on board with Nvidia and other companies. Morgan Stanley also expects Samsung’s target price to increase to 105,000 won (approximately $82) with a 36% upside in 2025.

Samsung Price Predictions

The company has already increased its research and development spending to 11%. With a cash reserve of more than 100 trillion won, it is poised to realize the benefits of the growing AI and chip market.

According to Bloomberg Intelligence, the company’s operating profit margin for semiconductors can increase further. However,?SK Hynix, a leader in high-capacity memory used in AI-powered programs, is expected to face?tough competition.

However, Samsung Electronic Co. announced it will spend 133 trillion won (approximately $103.74 billion) on logic chip businesses by 2030. Samsung is also expected to invest heavily in AI-based smartphones, including neural processing units (NPUs). According to experts, the stock price may touch 95,203 KRW (approximately $74.26) by the end of 2024 and 148,699 KRW (approximately $116.98) by 2029.