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[REVIEW] Samsung Electronics (005930 KS) Q2 Earnings: shares slump after earnings fail to alleviate investors' concerns surrounding overvaluation

Newsquawk Staff ·

  • Samsung Electronics shares slumped more than 9% in Korean trade, despite earnings topping most analyst expectations.
  • In brief, Q2 Op. Profit came in at 89.4tln (exp. 84.2tln), Revenue 171tln (exp. 172.2tln). Part of the profit surge was attributed to the price gains in DRAM/NAND, suggesting that the strength could be seen as cyclical. Further adding to the negative sentiment was that the results include one-off expenses for employee bonus provisions following recent labour negotiations. Samsung agreed earlier this year to scrap its 1,000% base salary bonus cap and earmark 10.5% of operating profit for bonuses. Note: Full Q2 results are due at the end of the month.
  • Overall, metrics have been described as strong, though not quite good enough to calm investors’ concerns surrounding overvaluation. Moreover, when looking at the percentage beat vs expectations, Op. Profit (+6%) was the lowest across several quarters. 
  • Some have opined that the strong results had already been priced in by investors, and that some are selling-the-news and/or booking profits. Others have blamed the one-off expenses related to employee bonus provisions.

Price Action

  • The move lower has been hefty, with Samsung falling as much as 9%, weighing on the KOSPI (-4.9%). Regional peers such as SK Hynix (-6%) and Kioxia (-11%) also extended lower. The move has also extended globally, with European tech names (ASML -4.6%, Infineon -5%) sitting firmly in the red, whilst the tech-heavy NQ (-0.8%) underperforms.

Analyst Commentary

  • Citi’s Lee stated that “we believe memory fundamentals are intact”, noting strong DRAM pricing and CPU demand.
  • Tickmill Group analyst Munnelly said, "investors are not walking away from the AI story, but they are asking whether a sector priced for perfection can keep delivering perfection into earnings season”.
  • Iwai Cosmo Securities analyst Shimada suggested that the move lower is “a healthy correction of a distorted market”; he sees investors moving towards cheaper value stocks, rather than chip-exposed names.
  • Petra Capital analyst Yong noted that the strong result was “largely priced in”, with investors concerned about the sustainability of the AI boom.
  • Saxo’s Chanana said that, following recent gains in the share price, investors “now demand confident guidance”.
  • Mirae Assets Securities analyst Joo-Yoon pinned the move lower in Samsung as “profit-taking”.

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