Following a sharp selloff in recent months, the South Korean memory-chip company says current share prices don't reflect the business's 'intrinsic value'
Shares of SK Hynix are well off their highs of earlier in the summer.
Flush with cash after benefiting from the surge in memory-chip demand, SK Hynix plans to deliver some of that money back to shareholders.
After the close of overseas trading on Wednesday, SK Hynix (SKHY) (KR:000660) announced it plans to repurchase 40 trillion ($28.7 billion) South Korean won in shares within three months, starting on Thursday.
The move comes as SK Hynix's Seoul-listed shares have lost nearly half their value since peaking in June. Shares of SK Hynix have still more than doubled on the year, but investors have grown more cautious about the durability of the memory-chip boom. There have also been concerns about the use of leverage by South Korean investors chasing bigger gains in the country's strongly performing stock market.
SK Hynix said the current share price fails to reflect its "intrinsic value." The company intends to start delivering more than 50% of cumulative free cash flow back to shareholders, whereas its previous target called for "within 50%." Management confirmed that it was considering fixed and special dividend payouts.
Analysts tracked by FactSet expect SK Hynix to deliver around KRW 170 trillion in free cash flow for 2026, versus KRW 25 trillion in 2025. The company saw profits soar 557% in the latest quarter, and analysts model 484% growth for the full year.
The planned buyback target represents about 24 million shares, or 3.3% of those outstanding.
With the repurchase announcement, the company is sending a message about its confidence in its prospects over the next several years. And this isn't the first time: Amid the July rout that sent global semiconductor stocks reeling, SK Hynix CEO Chey Tae-won made a personal acquisition of KRW 4.8 billion in stock.
Last week, he spoke to CNBC of his view that memory-chip prices would stay stronger for longer.
Samsung Electronics (KR:005930), the closest peer to SK Hynix, also helped to improve sentiment toward memory stocks by announcing a 15% price hike on some of its advanced foundry services after the Korean market closed on Wednesday.
SK Hynix, which conducted an IPO of U.S. shares in July and trades on the Nasdaq, saw its American depositary receipts rise 4% in premarket action Wednesday following the buyback announcement.
While it remains to be seen whether the repurchase plan can bolster confidence in the sector over a longer stretch, there are broader forces at work in markets right now that may overwhelm stock-specific ones. The rise in global bond yields BX:TMUBMUSD30Y has damaged trading sentiment, lifted long-term borrowing costs and raised questions about the sustainability of the AI spending bonanza.
-Jules Rimmer
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