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Barclays Ignites SK Hynix Stock with Overweight Call
14 Jul
Summary
- Barclays initiated SK Hynix ADRs with an Overweight rating.
- Analysts foresee worsening industry supply tightness through 2027.
- SK Hynix is expected to maintain its HBM leadership position.
Barclays initiated coverage of SK Hynix's ADRs on Nasdaq, assigning an Overweight rating and a $330 price target, implying substantial upside potential. Analysts anticipate worsening DRAM supply tightness through 2027, projecting significant growth for the company. This outlook is based on Barclays' global DRAM model, which indicates bit supply will grow 20% year-over-year in 2027, lagging behind demand growth of 35%.
The bank has switched its coverage from SK Hynix's Korea-listed shares to the ADRs, which trade under the symbol "SKHY." Investors remain largely unconvinced about the memory market's prospects, with skepticism surrounding long-term agreements and the valuation gap between memory stocks and semiconductor equipment names.
Despite rapid advancements in China's memory ecosystem, Barclays sees limited immediate impact on the global DRAM market. The analyst forecasts SK Hynix will maintain its leadership in High Bandwidth Memory (HBM), with expected technological advancements neutralizing perceived disadvantages and securing over 50% HBM market share for years.
Barclays also highlighted a potential shift towards capital returns, estimating SK Hynix could hold cash equivalent to over 40% of its market cap by the end of 2027. This financial position provides ample opportunity for share buybacks to boost earnings growth.
