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Ridiculous expectations: Despite crazy profits, Samsung stock is in the red

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Last updated: October 8th, 2021 at 12:52 UTC+02:00

In spite of a highly optimistic earnings guidance posted Friday morning, Samsung stock isn’t looking too hot today. On the contrary, it ended day trading in the red as the market proved apathetic to the historic Q3 forecast.

The tech giant’s shares have been trading at just under $60 — 71,500 won — once the Seoul stock exchange closed up shop for the week several hours ago. The decline isn’t substantial, mind you; that’s only 0.14% down compared to Thursday. But it definitely illustrates how ridiculously unrealistic investors have gotten with Samsung nowadays.

The economic background of this story is more complicated than it seems

Far Eastern analysts report the market is already looking toward Q4 and hasn’t expected anything below record Q3 profits, anyway. The economic reasons for this baffling situation are still a bit more complicated than investors being unreasonable. Namely, two-thirds of Samsung’s forecast income for the third quarter of the year stems from semiconductors. Largely on account of the ongoing global shortage. But in addition to keeping prices high, what this shortage is doing is strengthening the won against the U.S. dollar.

That, in turn, makes Samsung’s “historic” profits pretty context-dependent. And way less impressive from an investor’s point of view than it might seem at first. Combined with the fact that the likes of Intel and TSMC are aggressively investing in their own foundries, Samsung’s continued dominance in the semiconductor space is far from guaranteed. This, in turn, might have led to today’s correction which seems to imply Samsung stock was already overvalued.

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