Samsung shares drop following reduction in stock price target by Morgan Stanley

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Samsung’s smartphone sales have been going strong, but they haven’t been the primary reason for the record profits the company has attained in the last two quarters. An increase in demand and prices for memory chips for smartphones and servers is what truly helped, but it looks like the chip business may not offer the same level of growth for Samsung’s financial numbers in the coming months. That’s according to Morgan Stanley, which has cut its recommendation on Samsung, causing the company’s shares to drop by 4.2 percent.

Samsung shares drop following Morgan Stanley report

According to the investment firm, NAND prices have started to reverse this quarter and the boom in demand for memory chips is set to peak soon, although another research firm believes the reaction to market trends was a “bit over-sensitive” in this case. According to Greg Roh, an analyst at HMC Investment & Securities, it was known already that “NAND prices are going down, which is actually needed to encourage sound demand and increase shipments. And Samsung is strong in NAND chips for data center SSDs (solid state drives) which will be less affected.”

Still, Morgan Stanley’s view on Samsung’s stock has gone from “overweight” to “equal weight”, and the firm has reduced the Korean giant’s stock target price by 3.4 percent, resulting in a drop in shares to a one-month low. That’s not to say Samsung’s shares are going to be affected much, and it’s possible the increase in demand for its OLED panels (now that Apple is using one on the iPhone) could counter the decline in stock price. Even with the 4.2 percent decline, Samsung’s shares are at an all-time high this year, with a rise of more than 47 percent.

Today’s drop also trails behind that which the company suffered after the Note 7 was recalled; Samsung’s shares dropped by 7 percent at the time as the biggest one-day price decline in the company’s history. Furthermore, shares of SK Hynix, the second largest manufacturer of memory chips, also fell by 3.6 percent following Morgan Stanley’s report.

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