The Zhitong Finance App learned that Bank of America maintains a “buy” rating for South Korean memory chip giant SK Hynix (SKHY.US), with a target price of $250. Bank of America emphasized a number of investment points, including a shortage of storage supply, increased long-term agreements (LTAs), and high profit margins.
The Bank of America analyst team led by Simon Woo pointed out that the so-called “downsizing” phenomenon — that is, the reduction in the storage content of each device or GPU/CPU — is currently mainly occurring in the fields of PCs, smartphones, and low-end GPU/ASICs. Bank of America emphasized that this reflects a shortage in the supply of memory chips rather than a decline in demand for terminals. For high-end applications, including next-generation GPUs, relevant vendors will continue to use high storage content configurations without downsizing. Although some new fabs are under construction, cleanroom space is still tight, and DRAM and NAND wafer capacity expansion is limited. Combining the above factors, Bank of America determined that storage supply will maintain a tight pattern even in the long term.
At the business model level, Bank of America pointed out that as long-term agreements (LTAs) continue to increase, the average sales price (ASP) of memory chips is expected to stabilize and no longer show the characteristics of large fluctuations in the past.
In terms of shareholder returns, SK Hynix has reaffirmed its shareholder return policy of more than 50%, including the recently announced 40 trillion won share repurchase plan. Bank of America expects that in addition to this repurchase, SK Hynix will also pay a dividend of about 30 trillion won on the 2026 results, with a dividend-to-repurchase ratio of approximately 40:60.
Team Woo said, “We believe that the remaining payable free cash flow (FCF) is expected to be paid in April 2027 using a combination of dividends or repurchases after the March 2027 Annual General Meeting of Shareholders. As the memory chip supercycle drives both ASP and sales growth, SK Hynix's free cash flow is expected to exceed 200 trillion won in 2027. This will support the company to achieve a total shareholder return of over 100 trillion won in 2027.”
After the US market on Wednesday, Nvidia's strong revenue guidance led to the strengthening of chip stocks, and SK Hynix ADR rose 5% to $165.92 after the market. Earlier, it was reported that Samsung Electronics and SK Hynix plan to increase the supply of 8-layer HBM4 memory to Nvidia in the second half of this year.
On Thursday morning, Korea's Kospi Index rose 2.8%, while SK Hynix Korea stock rose 3.7%.