2024-09-19 10:56:06
Shares of memory chip maker SK Hynix (HXSCL) fell more than 6% in South Korean trading Thursday after Morgan Stanley analysts downgraded the stock twice from Underweight to Underweight.
So far, “the sun is still shining” for SK Hynix, the analysts said in a note. They expect 2024 to be another strong year for the chipmaker, driven by higher DRAM prices at the start of the fourth quarter, leading to “exceptional near-term gains.”
However, starting in the fourth quarter, the outlook is expected to change, analysts noted. While the long-term potential for DRAM, especially given AI-driven data center demand, remains promising, this is tempered by the fact that cyclical shortages are coming to an end.
“Looking beyond the fourth quarter of 2024, we see persistent risks to revenue and earnings per share as growth slows, prices fall and an increased competitive challenge in long-term sustainable high-bandwidth memory (HBM),” analysts said.
Samsung Electronics (SSNLF) competitor domestic memory chip fell more than 2%.
Along with the downgrade, Morgan Stanley cut its price target for SK Hynix shares by more than half, from 260,000 to 120,000 South Korean won.
The company is now the underdog within the bank’s global coverage of stocks, with the stock classified as Underweight now also its Top Pick.
Elsewhere, analysts at Stifel cut their estimates and price targets for Micron (NASDAQ:MU), another popular memory chip stock, citing a slowing bull cycle.
“We believe that demand for HBM is intact and forecasts of oversupply for next year are unfounded. However, consumer electronics sales (and more importantly, the mix) have clearly fallen short of expectations ” Stifel analysts said in a recent note.
“In our view, this could create a pause in the market in the coming quarters, with memory vendors reluctant to accept the trade-off of higher bit shipments for lower prices.”
The investment bank lowered its price objective on Micron shares to $135 from $165.
However, in the long term, Stifel staff believe that the conditions they considered favorable for MU remain “secure and could set the stage for reinforced price strengthening next year.”
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