JPMorgan Initiates SK Hynix at Overweight With $245 Price Target, Sees Memory Cycle Lasting Over 5 Years

TradingKey - On September 10, JPMorgan (JPM) released a new research report, initiating coverage on SK Hynix (SKHY) with an "Overweight" rating and setting a price target of $245.

The bank believes that the continued expansion of AI infrastructure buildout will drive the memory industry into a longer upcycle, and is bullish on SK Hynix's earnings growth potential during this expansion cycle, advising investors to buy on dips.

SK Hynix's stock price has also shown strong performance recently. In yesterday's U.S. stock trading session, the company's share price rose 7.05% to hit an all-time high, indicating that the market maintains high expectations for AI-driven HBM and high-end memory demand.

Source: Google Finance

JPMorgan expects that this memory upcycle driven by AI demand could last for over five years, with SK Hynix's earnings per share compound annual growth rate (CAGR) expected to reach 34% over the next two years. In its view, the company has already locked in over 50% of its capacity through long-term agreements, which not only helps improve future performance visibility but also enables the company to more fully benefit from the growing demand for high-performance memory in AI servers.

In addition to earnings expectations, SK Hynix's capital return policy has also become a key basis for JPMorgan's bullish stance. The company has raised its shareholder return pool to over 50% of free cash flow. With improving profitability and sustained cash flow growth, more proactive shareholder returns are expected to further enhance the company's appeal to investors and prompt the market to re-evaluate its valuation level.

Meanwhile, Goldman Sachs (GS) also holds a positive view on the memory chip industry. The bank believes that the previous downward pressure on the memory industry may have gradually eased, with the stock prices of Micron Technology (MU) and SanDisk (SNDK) having broken out of their prior consolidation trends, while market capital allocation to memory stocks remains low. The bank believes that if fundamentals continue to improve, some investors may re-increase their exposure to the memory sector.

However, the memory market itself remains highly cyclical, and chip prices, supply expansion, and end-user demand can all shift rapidly. Goldman Sachs also cautioned that the recent technical breakouts in memory stocks still ultimately need to be validated by earnings growth. Therefore, while AI demand remains strong, the market still needs to watch whether companies' actual financial performance can keep pace with stock price performance.