As the largest supplier of HBM (High Bandwidth Memory) for NVIDIA, South Korea's SK Hynix's stock price has surged by over 100% in the past year. Before the second-quarter financial report was released, Wall Street predicted that there is further room for growth.
According to media statistics, in the past month alone, at least 19 analysts have raised their forecasts for the company, citing reasons such as the huge potential demand for AI and the possibility of positive surprises in this month's financial report.
On Tuesday, Goldman Sachs raised SK Hynix's stock price target to 290,000 Korean won (approximately $210), about 25% higher than the closing price that day. Citi raised its target price to 350,000 Korean won last week, more than 50% higher than the current stock price, making it the most optimistic expectation on Wall Street according to media statistics.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5a3ff6d8-469b-406d-8923-12345a05c678.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5a3ff6d8-469b-406d-8923-12345a05c678.png"/>
Roh Jongwon, Chief Investment Officer of Seoul's Infinity Global Asset Management, stated:
<blockquote>
Currently, the stock price of SK Hynix does not fully reflect the potential of HBM. The market values HBM the same as traditional memory chips, but the profit margin of HBM is nearly double that of traditional chips.
</blockquote>
SK Hynix is set to announce its second-quarter financial report on July 26. The market expects SK Hynix to achieve 5 trillion Korean won in operating profit in the second quarter, setting a record high in 6 years. Benefiting from the demand for high-end devices in AI, the price of memory chips is rising, and SK is expected to continue its recovery trend this year.
Peter Lee, Global Technology and Communications Director at Citi Global Markets Korea Securities Co., Ltd., stated that due to the world's unfamiliarity with the potential of AI, the demand for HBM may not have been fully reflected yet, similar to the situation when smartphones were first introduced.
<blockquote>
Because this is a market that did not exist in the past, we do not know how far it can go.
</blockquote>
<h2>Is Hynix Already Expensive?</h2>
However, some analysts have expressed caution as the P/E ratio rises. According to compiled data from the media, SK Hynix's current P/B ratio is 2.9 times, the highest level since at least 2011.
Yoon Joonwon, Fund Manager at Seoul's DS Asset Management, stated:
<blockquote>
From a valuation perspective, we have entered unknown territory. I believe that this year and next year's earnings will exceed market expectations, but the market remains uncertain about this.
</blockquote>
Investors are also becoming nervous.
On Thursday, SK Hynix's stock price fell by 4.7%, after earlier reports in the media that Samsung would soon negotiate with NVIDIA on supplying its own HBM chips. However, Samsung later denied these reports
Some people are concerned that after SK Hynix's large-scale expansion, there may be an oversupply of memory chips, which will put pressure on chip prices. On June 30, SK Hynix announced an investment of $75 billion by 2028 for chip development and capacity expansion.
According to a previous article by Wall Street News, in order to meet market demand, SK Hynix and Samsung have converted over 20% of their DRAM production lines to HBM production lines. This move will result in a decrease in DRAM production while increasing the capacity of HBM chips.
Lee believes there is no need to be nervous, stating:
<blockquote>
Because this is an uncharted path, fluctuations are inevitable
</blockquote>

The most optimistic Citigroup raised SK Hynix's target price to KRW 350,000, more than 50% higher than the current stock price. Analysts say that the market values HBM the same as traditional memory chips, but HBM's profit margin is nearly twice that of traditional chips

"Traditional chip valuation does not apply to HBM"! On the eve of the financial report, Goldman Sachs and Citigroup both sing praises for SK Hynix