SSNLF share price forecast: Samsung flips the script

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The Samsung share price forecast suggests the long-range play is in chips

The Samsung share price forecast reflects the South Korean tech giant’s September 2020 gamble on foldable smartphones. Samsung needed success, and it delivered.

The Galaxy Z Fold3, starting at $899.99, and Galaxy Z Flip3 5G, starting at $399.99, gave the global smartphone leader a new lift. SSNLF likes what it sees so far. So much, in fact, that it is making more capacity investments to supply the burgeoning demand globally for foldables.

Of course, when it comes to the Samsung Electronics stock forecast, investors are not just concerned about whether these devices function properly: Healthy levels of demand are needed to justify the great expense that will have gone into research and development, and the planned supply increase.

Samsung needs to keep the pace with Apple, which released the long-awaited iPhone 13 Pro and iPhone 13 Pro Max in mid-September 2021. The higher-priced line, which tops out at $1,599, includes a new camera system, improved 5G and a ceramic shield front.

US technology research company Gartner’s third-quarter analysis in November 2021 found global smartphone sales to end users fell 6.8% on a year-on-year basis. Apple returned to its number two spot, while China’s Xiaomi returned to third. Samsung remained in the lead, albeit with a marketshare that shrank 1.9%. Its 69 million units sold in the third quarter were good enough for 20.2% market share versus Apple’s 48.5 million units for 14.2%.

For the fourth quarter, Strategy Analytics found Apple shipped more units (80 million) than Samsung (69 million). Counterpoint Research had them in the same position, but estimated 81.5 million Apple units shipped versus 67.2 million of Samsung’s.

Samsung reported fourth quarter sales volume in wireless of 72 million handsets and seven million tablets.

What is next for Samsung smartphones? The global chip shortage meant delays for the Galaxy S21 FE and Galaxy S22 to early 2022.

In early December 2021, Samsung named two new CEOs, Han Jong-Hee and Kyung Kye-Hyun, in order to merge its consumer electronics and mobile units. The move recognised that three-quarters of its third quarter profit of $13.4bn came from chips.

A January 2022 report on worldwide semiconductor revenue by Gartner said industry revenue increased more than a quarter to $583.5bn, the first time it crossed the half-trillion mark. Samsung regained top spot from Intel for the first time since 2018, with a 31.6% increase in revenue to $75.95bn and 13% market share.

The long-term goal for Samsung is to displace Taiwan’s TSMC by 2030 in the global chipmaking race. That is an ambitious goal: According to TrendForce, TSMC had almost 53% of market share, compared with Samsung’s 17.3% by the end of June 2021.

Analyst Kim Dong-Won of KB Securities told The Korea Economic Daily this in October 2021:

“Market concerns are growing that memory chip prices will soon be decided not by suppliers but by their clients.”

A big deal out of Texas is key to the strategy. More on that later. But first, let’s focus on how the company performed from October to December 2021. Samsung set records for total revenue in each quarter during in 2021, ending in record annual revenue of KRW280trn ($233.6bn) Gross profit increased by KRW500bn ($417.3m) sequentially to KRW31.6tn ($24.8bn). Sales of premium smartphones and lower gross margin due to a decline in memory prices.

It also reported KRW13.9trn ($11.6bn), down from the third quarter due to a special bonus for employees, a decline in merit prices and the season rise in smartphone marketing. Both operating profit and margin rose on a year-on-year basis, driven by the semiconductor division.

Ben Suh, the Samsung executive vice-president of investor relations, conveyed the good news to analysts at the end of the fourth quarter.

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“We expanded sales of premium smartphones, including foldables, as well as TVs and home appliances amid year-end peak seasonality,” Suh said.

Suh had even more good news to share, with the 20 October list of 100 Best Global Brands from Interbrand. Samsung ranked fifth for the second consecutive year, valued at nearly $75bn.

“Our reorganization to a customer centric management system, sustainability activities, and releases of innovative products were highly valued as we reaffirmed our position as a global top five brand.”

This bodes well for the Samsung stock price forecast going forward. However, the company conceded even before the Omicron variant’s discovery that Covid-19 remained a risk. The smartphone market will continue growing and the wearables market is expecting double-digit gross. Outlook for 2022 includes expanded OLED display adoption and rising 5G smartphone market penetration.

This suggests that the company is prepared to withstand any further disruption as the pandemic continues.

Samsung share news: Undervalued?

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You have heard about the smartphones. How about display screens? Late in December 2021, Samsung announced a $2.5bn proposed purchase of LG Display’s organic LED and LCD panels in 2022. But Samsung is not all about mobile phones and TV screens.

Samsung made two moves in North America within eight days in the fourth quarter. First, in Regina, Canada, a new regional office to lead deployment of 5G for SaskTel, the main legacy provider in a province with substantial wheat, oil, potash and uranium mining industries.

Samsung is already benefitting in the US from the pressure that China’s Huawei Technologies is coming under. With the US imposing sanctions on Huawei and urging its allies to avoid using the company’s equipment in its 5G networks, due to national security concerns, telecommunications providers and governments are having to seek out alternatives. In 2020, Samsung agreed to a $6.6bn, five-year deal with Verizon Communications.

The second move came on 1 December 2021, with the announcement of a $17bn chip factory in Williamson County, Texas. Samsung already employs 10,000 people in Austin, Texas, its biggest factory outside its home market. This new site, to be ready in 2024, will employ 2,000 people and be key in the company’s goal to take a bite out of chipmaker TSMC.

"With greater manufacturing capacity, we will be able to better serve the needs of our customers and contribute to the stability of the global semiconductor supply,” said Kinam Kim, vice chair and CEO of Samsung Electronics Device Solutions Division.

Samsung share price forecast: What’s next?

Analysts from Shinhan Investment Corp, quoted in BusinessKorea, said they expected Samsung chip production would normalise by February at the earliest. “Memory market conditions are improving at a faster pace than anticipated,” they said, predicting Samsung would lead global semiconductor stocks this year.

Shinhan forecast quarterly earnings would bottom out in the first quarter and improve beginning in the second quarter. On a full year basis, the firm’s analysts expect Samsung Electronics to post sales of KRW308.9trn ($257.8bn), up 10.6% year-on-year,  and operating profit of KRW60.9trn ($50.8bn), up 18.1% year-on-year.

Overall, analysts are enthusiastic about what lies ahead. Wallet Investor predicts the stock will rise to $75.62 within a year. On Yahoo, 26 analysts rate the stock “buy,” while 10 say “strong buy.” The 36 analysts gave a consensus KRW99,911 ($83.38) price target, with KRW57,000 ($47.57) low and KRW130,000 ($108.49) high.

During times of economic turmoil, a company can come to rely on diversification and having its fingers in many pies. Samsung, with its mobile phones, tablets, televisions, memory chips and household appliances, is certainly a strong example of that.

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