Samsung Electronics 1Q26 Results Reinforce Upside Logic; Morgan Stanley Maintains Top Pick and Overweight

Overview

This is a Morgan Stanley review of Samsung Electronics' 1Q26 results. Titled 'Stronger For Longer', the report's core conclusion is that Samsung Electronics' memory business, HBM4, AI demand, long-term supply agreements, and capital return potential are reinforcing the medium-to-long-term earnings upside logic.

Core views

The report notes that market debate focuses on whether LTAs, HBM4, capex, and sustained pricing power can drive earnings and share prices further upward. Morgan Stanley's stance is optimistic: labor issues are temporary factors, and supply disruptions are not a major concern; the memory industry landscape is distinctly different from the past, with Samsung holding advantages in HBM4/4e, advanced node foundry, and binding memory LTAs. Consequently, 2027 earnings and capital returns are not yet fully priced into market expectations.

Analysis framework

The report analyzes 1Q26 results, business segment growth, supply-demand constraints, HBM shipment guidance, capex plans, and valuation multiples, utilizing a Residual Income Valuation model to derive a base case target price.

Methodology notes

• Valuation methodsResidual Income Valuation Model

  Derives the base case target price using the Residual Income Model, referencing 2027e P/B, cost of equity, beta, and terminal growth rate.

  The report states the base case target price is derived from the Residual Income Valuation model; the target price corresponds to approximately 2x 2027e P/B, consistent with the commodity cycle peak of roughly 2.0x, assuming an 11.5% cost of equity, a beta of 1.0, and a terminal growth rate of 3%.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Samsung Electronics (005930.KS)

  Core Coverage Target

  Strengths

  Leadership in HBM4/4e, strong memory demand, supply tightness due to LTA constraints, and AI/hyperscale data center demand supporting a longer memory upcycle.

  Weaknesses

  Earnings growth concentrated in semiconductors; business remains exposed to product and memory cycle volatility.

  Comparison

  The report argues the current memory environment differs from historical cycles; although trading at 4.3x NTM P/E and 2.3x P/B, ROE is approximately 5x higher than past peaks, leaving room for re-rating.

  Risks

  Competition from Apple and Chinese smartphones, changes in the memory cycle, and excessive concentration of semiconductor earnings.

• SK hynix (000660.KS)

  Korean Tech Coverage Peer & Memory/Semiconductor Comparable

  Strengths

  Also within S. Korea Technology coverage scope; rated Overweight.

  Weaknesses

  Report does not provide separate fundamental analysis.

  Comparison

  As a memory-related peer in the industry coverage list, useful for observing risk appetite in the Korean semiconductor sector.

  Risks

  Report does not provide specific risks for this company.

Key data

• Target PriceW362,000Morgan Stanley base case target price.
• Closing PriceW226,000As of April 29, 2026.
• Implied UpsideApprox. 60.2%Calculated based on target price W362,000 vs. closing price W226,000.
• 1Q26 RevenueW133trRecord high, up 69% YoY and 43% QoQ.
• Semiconductor Sales Growth2.6xSemiconductor sales up 44% YoY; memory business up 292%.
• HBM Shipment Guidance2026 bit shipments to tripleReport states HBM4 ramp-up started in 1Q and is in sold-out status.
• 2026 CapexW60-70trBased on W110tr total capex excluding R&D, mainly allocated to DRAM and foundry.
• Valuation Multiples4.3x NTM P/E; 2.3x P/BReport argues stock remains mispriced relative to higher ROE.
• Market CapW1,636,945bnDisclosed in report cover table.
• Enterprise ValueW1,512,165bnDisclosed in report cover table.

Impact & implications

If the report's thesis holds, Samsung Electronics' investment logic will expand from a simple cyclical recovery to an AI-driven repricing of memory supply/demand, structural upgrades in HBM, and improved capital returns. Binding LTA commitments may limit supply elasticity in 2027, enhancing price and earnings sustainability; technological leadership in HBM4 and advanced foundry nodes could also support a reassessment of its peak earnings and valuation center.

Risks

• Product and memory cycle volatility, including Apple demand and competition from new Chinese smartphones.
• Excessive concentration of earnings growth in the semiconductor business.
• If the memory upcycle driven by AI and hyperscale data centers falls short of expectations, earnings upgrades and valuation re-rating may slow.
• If HBM4 ramp-up, advanced node foundry progress, or LTA supply constraints fall short of expectations, the report's core bullish assumptions would be pressured.

What to watch

• Speed of HBM4/4e mass production ramp-up and customer qualification progress.
• Whether 2026 HBM bit shipments achieve triple-digit growth.
• Share of LTAs in total capacity and their impact on supply tightness in 2027.
• Actual allocation and returns of W60-70tr capex in 2026 across DRAM and foundry.
• Whether AI and hyperscale data center demand continues to support memory prices.
• Whether semiconductor earnings growth translates into capital returns and EPS upgrades.