SK hynix headquarters in Icheon, Gyeonggi Province, and SK Group Chairman Chey Tae-won. Yonhap News, Newsis
SK hynix (000660.KS) has won a string of favorable assessments from global investment banks after unveiling a 40 trillion won ($28 billion) plan to buy back and cancel its own shares. Although the stock has swung sharply amid concerns over slowing artificial intelligence investment, the banks argue that its current price is far too low given the company’s vast cash-generating power and room for further shareholder returns.
Nomura Calls Stock “Severely Undervalued,” Keeps 4.7 Million Won Target
According to the financial investment industry on the 20th, Nomura maintained its “buy” rating and target price of 4.7 million won on SK hynix.
In a report that day, Nomura researcher CW Chung diagnosed the current share price as “severely undervalued,” noting that SK hynix is trading at price-to-earnings ratios of 3.8 times for this year and 2.8 times for next year.
Earnings growth driven by AI demand, an expansion of long-term supply contracts, and large-scale shareholder returns were cited as the key factors likely to drive a re-rating of the stock. Nomura assessed the current price level as an opportunity to buy more shares.
Nomura also highlighted the company’s cash-generating power, projecting that SK hynix’s free cash flow (FCF) will reach 156 trillion won in 2026 and 318 trillion won in 2027. It estimated the resulting shareholder returns at 78 trillion won and 159 trillion won, respectively.
The bank also raised the possibility that the pace of share buybacks could be faster than expected. Nomura projected that the current buyback could conclude earlier than the scheduled date of November 19, and that SK hynix could unveil additional shareholder-return measures at its third-quarter earnings announcement.
JP Morgan likewise noted on the 20th that the announcement came faster than the market had expected. Over the past eight months, SK hynix has pledged to cancel a total of 39.4 million shares, combining the 15.3 million shares announced in February and the 24.07 million shares announced this time. JP Morgan called this the “most aggressive level” among memory rivals and added that it “could be an opportunity to accumulate more shares.”
JP Morgan estimated SK hynix’s cumulative FCF for 2025 to 2027 at 475 trillion won. Even excluding the already-announced share buybacks, cancellations and dividends, it said at least 180 trillion won in additional shareholder returns is possible through 2027 — a figure equivalent to more than 16% of the current market capitalization. It maintained its “overweight” rating and target price of 2.75 million won as of next June.
“A Strong Signal”: 93% Upside Seen for U.S. Shares
Barclays also assessed the decision as a “Strong Signal” to investors.
On the 19th, Barclays researcher Simon Coles analyzed SK hynix’s decision to return more than 50% of its cumulative FCF for 2025 to 2027 to shareholders, calling it equivalent to about 15% of market capitalization.
Coles particularly praised the company’s ample capacity for capital spending even alongside large-scale shareholder returns, saying its cash-generating power is strong enough to expand future production capacity and invest in new business opportunities while still returning cash to shareholders.
Barclays maintained its “overweight” rating and target price of $300 on SK hynix’s American depositary receipts (ADRs). That implies about 93% upside compared with the ADR’s closing price of $155.62 on the 18th.
The bank also kept a positive outlook on the memory market. It said that while some customers could reduce the amount of memory they install in response to the supply shortage, that shortage is unlikely to ease in the short term, which should support average selling prices (ASP). It also forecast that SK hynix would maintain its leading position in the high-bandwidth memory (HBM) market.
However, it cited hyperscalers’ capital spending, the return on investment (ROI) of AI, and China-related risks as variables for the semiconductor sector going forward.
Morgan Stanley focused on the potential for expanded regular and special dividends. It also mentioned the possibility of raising the ADR’s weighting, currently about 2.5%, depending on future needs, but pointed to the limited convertibility between domestic shares and ADRs as an obstacle.