Memory Semis Monthly "June '26 Edition: Near-term pullback an opportunit..."

Research evidence excerpt

Memory Semis Monthly "June '26 Edition: Near-term pullback an opportunit..."

Valuation Method and Risk Statement

Investing in the technology sector involves a high degree of risk. Rapid technological changes,

increasing competition and exposure to macroeconomic cycles are among the many risks

faced by investors in technology stocks. Moreover, it is extremely difficult to project the

financial results of tech companies since their operating models are highly volatile and

unpredictable. Finally, valuing technology stocks can prove challenging, as neither traditional

nor non-traditional valuation measures have provided much insight into how these stocks

trade.

Samsung: Some of Samsung’s operating profit comes from mobile phones directly (and more

indirectly for components) where we see revenue growth for the industry decelerating as the

smartphone market starts to mature. The industry is characterized by product cycles, intense

competition and requires significant scale and ongoing expenses for marketing/promotional

activities. Some of its divisions (Memory and Display Panels) operate in industries which are

cyclical and characterized by fluctuations in supply, demand and capital spending. Both

industries have commodity-like features – although it is to be noted that the DRAM industry is

now operating with significantly fewer players than before. Whilst overall cyclical risks have

decreased longer term for DRAM (our "Goldilocks scenario"), cyclical corrections will likely

occur. Consumer exposure overall at Samsung is universally high across products, although

well balanced in terms of geographies. Strength in the Korean Won vs. major currencies can

penalize earnings. Being a large component of the KOSPI, Samsung faces country risks as well

indirectly.