Securities Firms Reverse Course as KOSPI Falls Below 7,000... More Downgrade Reports Than Upgrades in July

Upward Revision Dominance Peaked at 9.7x Early in the Year... Reversed in July
Target Prices for Samsung Electronics and SK hynix Now Diverge by as Much as Twofold

Although the strong earnings growth of Samsung Electronics and SK hynix continues, domestic securities firms have sharply shifted their stance regarding target price revisions.

According to financial information provider FnGuide, between July 1 and July 16, domestic securities firms issued 249 reports raising target prices, while 323 reports lowered target prices—74 more downgrades than upgrades. This is the first time this year that reports lowering target prices have outnumbered those raising them.

The KOSPI index fell below the 7,000 mark again on the 16th, as displayed on the KOSPI closing price on the status board in the dealing room of Hana Bank in Jung-gu, Seoul. Photo by Yonhap News Agency

In January, reports raising target prices were 4.1 times the number of reports lowering them, and in February, the gap widened to as much as 9.7 times. The favorable balance continued in March at 5.9 times, in April at 3.9 times, in May at 4.0 times, and in June at 2.2 times, but the gap gradually narrowed. This month, however, the number of target price downgrades finally surpassed that of upgrades.

This trend has also applied to major semiconductor stocks SK hynix and Samsung Electronics. The number of SK hynix target price upgrade reports decreased from 32 in April to 22 in May and to 18 in June. For Samsung Electronics, the figures were 26 in April, 31 in May, and 19 in June, also showing a downward trend. There are also significant disparities in the target prices presented by securities firms. For Samsung Electronics, KB Securities set a target price of 600,000 won, Kiwoom Securities 390,000 won, and DB Financial Investment 360,000 won. For SK hynix, KB Securities and Mirae Asset Securities both suggested 4,200,000 won, while BNK Investment & Securities suggested 1,850,000 won and added a 'Hold' rating. This results in nearly a twofold difference in target prices for the same stock.

The main reason for the wide variance in securities firms' forecasts is the recent surge in market volatility. Since the start of July, the KOSPI index has repeatedly experienced a “roller coaster” pattern, with intraday rallies mostly reversing by the close. On July 16, the KOSPI index fell to 6,820.60 at closing, dropping below the 7,000 mark. As investor sentiment was severely shaken, the prevailing view is that securities firms are rapidly and conservatively revising their target prices.

LS Securities stated in a report released the previous day that although valuations (the ratio of stock price to earnings) have fallen to historical lows, it is premature to actively increase stock allocations based on this alone. Hwang San-hae, a researcher at LS Securities, wrote, "Recently, as the share prices of Samsung Electronics and SK hynix have fallen while their earnings projections have been revised upward, their 12-month forward price-to-earnings ratios (PER) are at historic lows of 4.8 and 5.3, respectively. Although the valuation merits are apparent, unique discount factors for leading artificial intelligence (AI) stocks and valuation errors that arise during periods of accelerated earnings reappraisal make it insufficient to justify additional allocation increases."

However, some point out that the target prices presented by securities firms tend to follow, rather than lead, actual share price movements. There is also criticism that these frequent target price adjustments can cloud individual investors' decision-making.

This content was produced with the assistance of AI translation services.