Micron Technology's latest earnings are further fueling SK Hynix's stock - and analysts are intrigued about what's to come after the South Korean memory giant completes its U.S. listing next month.
That listing will make SK Hynix's stock more accessible to U.S. investors and could also help it fetch a higher valuation multiple, according to analysts. SK Hynix disclosed Wednesday morning that it was seeking to raise nearly $30 billion through a deal that would see shares trade on the Nasdaq as well as in South Korea, where they're currently listed.
D.A. Davidson's Gil Luria highlighted the valuation discrepancy between stocks that trade in the U.S. and those solely listed on exchanges elsewhere. With that in mind, adding a U.S. listing could help narrow the valuation gap with shares of companies such as Micron $(MU)$ and Sandisk $(SNDK)$.
Sandisk and Micron shares trade at 10.47x and 9.46x forward earnings, respectively, while Hynix trades at 6.97x forward earnings, and Samsung Electronics (KR:005930) is at 6.45x, according to Dow Jones Market Data.
Nicholas expects Hynix to get a valuation re-rating, meaning an opportunity for a higher multiple, stemming from the U.S. listing. That's because the stock will see more analyst coverage and institutional ownership, which will "help fuel more buying early on" after it's listed on July 10.
While the two Korean stocks trade at a noticeable discount, all four chipmakers are in value territory as investors question the sustainability of the current pricing boom.
Micron's management offered a bit more confidence on that matter during Wednesday's earnings call. Pricing growth should moderate in the current quarter, but the major imbalance between supply and demand should persist for more than 18 months.
"Even as we expect industry supply to improve gradually in 2028, we currently do not have line of sight as to when memory supply will be able to catch up with increasing demand," Micron CEO Sanjay Mehrotra said on the call.
SK Hynix shares were up 7% shortly after the open of South Korean trading KR:180721. Micron's stock finished Wednesday's extended session up nearly 16%.
With a market cap above $1 trillion, it makes sense for Hynix to have direct access to U.S. capital markets that "are by far the broadest and deepest," rather than being limited only to investors who can buy securities outside of the country, Luria said.
Being part of the U.S. market also gives Hynix the opportunity to raise capital in a market "that is very interested and excited investing in AI hardware" at a time when the company needs to invest in building out manufacturing capacity, he added.
Given the nearly $30 billion target, the planned U.S. listing would surpass Alibaba's $(BABA)$ 2014 debut as the largest offering of American depositary receipts in history, Andrew Rocco, stock strategist at Zacks Investment Research, told MarketWatch in emailed comments.
Luria sees Hynix's U.S. listing as a double-edged sword for Micron, which is a U.S. pure play on memory trends. Micron, Hynix and Samsung are the world's top producers of high-bandwidth memory, which is in high demand from AI chipmakers including Nvidia (NVDA).
On one hand, having more choice could shift some capital from Micron and Sandisk toward SK Hynix, he said. On the other hand, he noted that a peer's listing could help investors better understand the memory business.
"Those two things should even out," Luria said, adding that he sees an advantage in having more comparables in the market rather than fewer.
U.S. investors have been able to get some exposure to Hynix and Samsung through the Roundhill Memory exchange-traded fund that launched in April and billed itself as an easy access point for overseas memory shares. Luria now wonders if Hynix's U.S. listing will pose challenges for that ETF.
Rocco said the U.S. listing makes Hynix "eligible for major domestic tech and semiconductor indices," meaning passive ETFs will have to heavily buy the ADRs to keep up.
"Meanwhile, ETFs like Roundhill may be forced to scale back positions in other memory companies" to make room for Hynix, he added.
However, David Nicholas, president of Nicholas Wealth Management, told MarketWatch the listing doesn't necessarily mean investors will sell ETFs to buy shares of Hynix, considering the high tax cost they would incur.
Another notable trend to watch is that investors will be able to write options on Hynix, which could increase the appeal of the U.S.-listed shares, given the opportunity for some downside protection.
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