Key Morningstar Metrics for Samsung Electronics
- : KRW 310,000Fair Value Estimate
- : ★★★★Morningstar Rating
- : NoneMorningstar Economic Moat Rating
- : HighMorningstar Uncertainty Rating
What We Thought of Samsung Electronics’ Earnings
Samsung Electronics 005930' revenue and operating margin for the June quarter were KRW 172 billion and 52%, up 28% and 944 basis points sequentially. Shares closed flat.
Why it matters: Revenue missed our estimates due to softer DRAM pricing, up 42% sequentially versus our forecast of 48%. We suspect lower price hikes were due to a higher-than-expected long-term supply agreement, or LTA, mix, reducing near-term price volatility.
- Near-term fundamentals remain intact due to ongoing memory undersupply, but we foresee lower peak pricing for conventional memory longer term. Device customers are struggling to pass on costs, as evidenced by the loss in Samsung’s DX division this quarter. We expect rising pushback in future pricing negotiations.
The bottom line: We lower our fair value estimate for Samsung Electronics by 6% per share to KRW 310,000, reflecting lower peak memory prices over the cycle, but keep GDRs broadly flat due to won depreciation. Our views on tail-end cyclicality remain, but the recent selloff seems detached from fundamentals. Shares look cheap.
- While Samsung’s nonmemory segments justify a valuation discount to pure-play memory peers, the current discount is overly steep to us. We see the selloff as partly due to softer peak pricing expectations but believe that deleveraging in shares amplifies drawdowns.
- We lower our 2026 and 2028 revenue and operating margin estimates by 2%-4% and 25-75 basis points due to lower peak memory prices. Our midcycle estimates are unchanged, as we keep our view of a 2029 cycle turn.
Between the lines: Samsung noted that 25% of LTA prepayments have been received and cited longer LTA durations as bullish for memory. We have yet to see material contributions show up in Samsung’s balance sheet, implying that the deposit quantum remains small.
- We maintain that without material deposits on LTAs, hyperscalers will not be deterred from foregoing their financial commitments if artificial intelligence monetization falls short.
