Goldman Sachs maintained buy ratings on two of the largest memory suppliers following a pronounced retreat in their stock prices, according to a research note published Monday.
Over the past month, Samsung Electronics and SK Hynix shares declined by 23% and 35%, respectively. Goldman Sachs pointed to a cluster of concerns that it says have weighed on investors, among them softer expectations for memory pricing, the absence of details on long-term supply agreements, elevated inventory at module makers, rising supply coming out of China, and the lack of new shareholder return announcements. SK Hynix also reported a second-quarter operating profit that missed expectations, which the firm cited as an additional pressure point.
Following the pullback, Goldman Sachs highlighted the companies' valuation metrics. Samsung Electronics was trading at 3.6 times 2027 price-to-earnings and 1.4 times price-to-book. SK Hynix was trading at 3.5 times 2027 price-to-earnings and 1.6 times price-to-book. The firm interpreted these multiples as indicating the market may be skeptical about the sustainability of solid earnings for both companies.
In its report, Goldman Sachs addressed eight investor questions related to the memory industry and the two companies. The topics covered included pricing trends for high bandwidth memory, the status and implications of long-term agreements, inventory dynamics across the supply chain, China DRAM production trends, and issues around American depositary receipts.
The note also acknowledged that a range of factors not tied directly to company or industry fundamentals could have contributed to the recent stock declines. Goldman Sachs therefore appears to view the price moves as driven by both fundamental and non-fundamental forces.
While the investment bank reiterated its buy ratings, its analysis emphasized that current market prices reflect skepticism about future earnings durability and that investors are focused on a set of discrete risks and near-term data points in the memory market.
Context for market participants
- Investors are reacting to a mix of demand and supply signals - including pricing expectations and rising China supply - which have coincided with a significant re-rating of these stocks.
- Valuation metrics cited by Goldman Sachs place both companies at similar low multiples on 2027 earnings and modest price-to-book ratios, which the firm read as a sign of market skepticism.