Goldman Sachs becomes more pessimistic over Samsung's Q4 operating profit

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By Anna J. Park

Goldman Sachs has significantly lowered Samsung Electronics' operating profit estimate for the fourth quarter to 5.8 trillion won ($4.5 billion), which is about 25.6 percent down from its previous Q4 estimate of 7.8 trillion won. The projected number is also a 58.3 percent cut from Samsung's operating profit posted in the same quarter last year.

The decrease in the estimate mostly stemmed from the forecast of a slashed operating profit in the conglomerate's semiconductor business unit. The global investment bank estimates that Samsung will reap 1.5 trillion won in operating profit in Q4 from its chip-making business, which is a whopping 83 percent drop from the electronics giant's operating profit from the semiconductor unit in the fourth quarter of last year.

Goldman Sachs' earnings estimates for Samsung show a clear difference from local brokerage companies, which have projected more optimistic numbers. According to financial data provider FnGuide, local analysts' consensus estimates for Samsung's Q4 operating profit stand at around 7.3 trillion won, which is close to Goldman Sachs' previous estimate.

The global investment bank explained that it decided to make the downward adjustment, considering weakened performances in the global memory chip sector and Samsung's decreased shipments of smartphones and TV sets. The financial company added that Samsung will be posting a bigger fall in its operating profit next year, due to the global market's memory chip down cycle.

Despite this sullen forecast for next year, some local analysts pointed to the bright side, saying that a turnaround of the memory chip market will come in 2024.

“Much of the impact from the expected slowdown in demand and the memory chip down cycle next year is already reflected in Samsung Electronics' share prices,” Lee Seung-woo, an analyst at Eugene Investment & Securities, said. “If companies continue to take proactive measures to reduce their chip inventories, it is likely that Samsung's stock price next year will show a different trajectory than that of the past two years,” he added.