Shares of SK hynix (000660.KS) and SK Square (402340.KS) tumbled together following Meta's entry into the cloud business and a plunge in U.S. semiconductor stocks. Yet brokerages sharply raised their target prices, betting on further upside potential.
IBK Securities on Tuesday maintained its buy rating on SK hynix and raised its target price to 4 million won from 1.8 million won, an increase of about 120%. On the same day, Yuanta Securities lifted its target price for SK Square to 2.1 million won from 840,000 won in a report. SK Square is the largest shareholder of SK hynix, holding a 20.5% stake.
"SK hynix's earnings surprises will continue for an 11th consecutive quarter, from the fourth quarter of 2023, when HBM took off in earnest, through the second quarter of this year," said Kim Woon-ho, an analyst at IBK Securities. "The market is still, and even now, excessively underestimating memory demand." His analysis noted that SK hynix's stock trades at a price-to-earnings ratio (PER) of about 8 times based on estimated 2026 earnings per share (EPS), lower than AI materials, parts, and equipment companies.
The rise in the target price for SK Square was also largely driven by the increase in the value of its SK hynix stake. In addition, expected earnings improvements at TMAP Mobility and SK Shieldus, key components of SK Square's portfolio, heightened expectations for the stock's gains.
"With the surge in SK hynix's stock price, the value of SK Square's subsidiary stakes has expanded from 99 trillion won at the start of the year to 375 trillion won," said Lee Seung-woong, an analyst at Yuanta Securities. "Considering the 110 billion won share buyback plan and the increase in dividend income received from SK hynix, the annual scale of shareholder returns is likely to expand further."
In contrast to such outlooks, SK hynix and SK Square plunged from early in the session that day. As of 9:53 a.m., SK hynix was down 8.98% and SK Square 10.7%. Samsung Electronics (005930.KS) also fell 7.31% from the previous session. Semiconductor sentiment cooled after U.S. chip stocks including Micron and SanDisk plunged overnight on news of Meta's entry into the cloud business.
Still, brokerages are focusing on the fact that an actual slowdown in AI demand and earnings has not materialized despite the stock price volatility. Some interpret that fatigue had built up in share prices given the large gains semiconductor stocks had recorded, and that Meta's cloud entry stimulated investors to take profits.
