Can investors trust target prices? Skepticism grows as bullish calls persist.

Despite growing concerns that the memory chip market may be nearing a peak, brokerages remain bullish and some even raise their target prices for semiconductor stocks — namely Samsung Electronics and SK hynix. The optimistic outlook, however, has provoked skepticism among investors over how much they should trust analysts' forecasts.

On Wednesday, KB Securities raised its target stock price for Samsung Electronics to 600,000 won ($397) from 530,000 won.

"Global investment in artificial intelligence is expected to increase from $800 billion this year to $1.1 trillion next year and $1.5 trillion by 2028, which will lead to prolonged shortages in memory chip supply," Kim Dong-won, head of research at KB Securities, said.

"Demand for memory chips will grow 150-fold as AI is adopted across a wider range of industries."

Other brokerages took a similar stance. Eugene Investment & Securities set a target price of 560,000 won on the same day, and other estimates for Samsung Electronics were similarly bullish — roughly double the chipmaker's 277,500 won closing price for the day: 530,000 won by NH Investment & Securities; 585,000 won by Daol Investment & Securities; 500,000 won by Samsung Securities; and 590,000 won by Korea Investment & Securities.

When looking at past cases, however, brokerages have often maintained optimistic outlooks even during market downturns.

The best-known example came in 2021 and 2022, when the so-called Donghak Ant Movement gained momentum. The term refers to a wave of buying by retail investors who poured money into domestic stocks during the Covid-19 pandemic, drawing a parallel with the 19th-century Donghak Peasant Movement as individuals sought to push back against foreign and institutional investors.

Samsung Electronics reached its then-highest price of 96,800 won on Jan. 11, 2021, driven by strong buying from retail investors. As expectations that the stock would soon surpass the 100,000 won mark grew, Korea Investment & Securities issued a target price of 120,000 won that same day.

Instead, the stock entered a prolonged decline as the semiconductor market weakened and concerns over an economic slowdown mounted.

Even in April 2022, after Samsung Electronics had traded below 70,000 won for more than a month, the average target price among brokerages remained above 100,000 won.

Although a report that lowered the target price to 77,000 won came out in late March 2022, Samsung Electronics was already trading below 70,000 won at the time. Many brokerages continued to maintain target prices between 70,000 won and 90,000 won through the end of the year, even as the stock fell to 52,600 won by late September and remained in the 55,000 won range at year-end.

Samsung Electronics did not reach 100,000 won until Oct. 27 last year, about three years later, or roughly four years and nine months after expectations for a 100,000 won price point had peaked in early 2021.

This is why criticism is emerging that securities firms' target prices merely followed a decline that was already underway, rather than warning of the possibility of a drop in stock price in advance.

Some within the industry acknowledge that target prices are structurally prone to lag behind market movements.

"Brokerages and listed companies are connected through research, investment banking and institutional sales relationships, making it difficult in practice to lower target prices," a representative at a securities firm said.

"Even if a brokerage maintains a 'buy' rating, cutting its target price should effectively be read as issuing a 'sell' opinion."

BY JANG SEO-YUN [[email protected]]