Investors fear Samsung might be over stretching itself

While Samsung is set to deliver huge profits this year, some investors are already starting to fret the tech giant will soon become a victim of its own success.

The outfit has a market capitalisation of $293 billion and is Asia’s most valuable company. Its shares have jumped 60 percent since end-2015, hitting a record high in late March.

Wall Street analysts are predicting that high chip prices continuing at least through to the end of this year, and the launch of a new flagship smartphone this month reviving its mobile business after last year’s Galaxy Note 7 fires.

But shareholders are less excited than they should be. The Stock is only up three percent since April and some investors are questioning the company’s long-term growth potential and whether it can maintain the double-digit profit growth expected this year.

Samsung’s operating profit is expected to grow just 5.5 percent next year compared to 61 percent in 2017, according to the average forecast from a Thomson Reuters survey of 16 analysts.

This is because most of Samsung’s growth has been the booming memory chip market, with prices for both DRAM and NAND chips soaring. Researcher IHS expects 2017 memory industry revenues to leap 32 percent to a record $104 billion this year.

But this growth will not be repeated, analysts say, with more production capacity coming online to alleviate the bottleneck. IHS projects 2018 memory industry revenue to grow by just 3 percent to $107 billion.