Samsung Electronics continues to ride the wave of AI demand, but it is evidently losing its competitive edge relative to SK Hynix. According to Citigroup, the situation could become more challenging for Samsung as labor tensions begin to build.
On Monday, Samsung's stock did rise by 4.8% at one point, reaching a record high. However, this gain appeared modest compared to the 12% surge seen in SK Hynix shares. Citigroup analyst Peter Lee has not abandoned his long-term bullish thesis, maintaining a "Buy" rating on the stock. Nevertheless, he reduced the price target by 6.3%, from 320,000 won to 300,000 won, reflecting growing near-term concerns.
The primary issue currently lies in labor risks. The labor union is planning a potential strike between May 21 and June 7, which could drive up costs at a time when profit margins are already under close scrutiny. Citigroup expressed specific concerns regarding performance bonuses and broader labor expenses, warning that these factors could erode profits if tensions escalate. Consequently, the firm has lowered its operating profit forecasts for Samsung by 10% for this year and 11% for next year.
In the long term, the memory chip cycle remains robust, with shortages expected to intensify further by 2027. However, the near-term path is likely to be bumpy.
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