SK Hynix stock popped to its highest point since October after the company published strong financial results and boosted its payouts to investors. It jumped to 1.48 million won in South Korea, up by 27% from its lowest level this month. So, will these gains hold?
SK Hynix stock jumps after strong earnings
SK Hynix, the biggest company in the high-bandwidth memory industry, published strong financial results as demand for its products.
The company said that its revenue surged by 328% in the third quarter to 104.62 trillion won, up by 328% from the same period last year. Its revenue was up by 32% from the previous quarter.
Most of the revenue came from its DRAM business, which benefited from a 20% surge in average price. In total, its operating profit jumped to 83.3 trillion won, bringing its operating profit margin to 80% and its EBITDA to 87.68 trillion won.
The results show how the ongoing AI boom has improved SK Hynix’s business. Its cash has jumped to 114.46 trillion won from 27.85 trillion won in the same period last yea, while its debt has fallen from 24 trillion to 15.8 trillion won.
In its statement, the company maintained that demand was still rising and that it will likely remain like that through 2030 because of the ongoing AI usage and expanding infrastructure investment. It is already sold out through 2029.
As a result, the company now expects to return about $45 billion to shareholders through dividends and buybacks.
Most notably, the company has become highly undervalued, with the forward price-to-earnings ratio being 5.4. This multiple is much lower than the S&P 500 Index’s 19.
AI jitters remain
Still, despite the strong earnings numbers, investors remain skeptical about the company and the entire sector. As a result, its stock remains 50% below its highest point this year. Other companies in the industry have also suffered that drop despite releasing strong numbers.
The Roundhill Memory ETF (DRAM) has plunged by over 37% from its highest point this year as companies like Samsung Electronics and Micron have slumped.
Investors are simply concerned about the potential for the AI bubble bursting, a move that will drive down demand. In a statement this week, Elon Musk warned that neocloud companies could collapse because of the funding issue.
SK Hynix share price technical analysis
SK Hynix chart | Source: TradingView
On the charts, the SK Hynix stock has rebounded to 1.48 million won from this month’s low of 1.17 million. This rally continued after the company announced its financial results on Wednesday.
Still, despite the rebound, SK Hynix remains below the 50-day moving average, while the Supertrend indicator has turned red. Also, many post-earnings pops have lacked follow-through in the past few months.
Therefore, in the near term, the stock may continue rising, possibly to the 50-day moving average of 1.59 million won. It will then pull back, potentially to 1.4 million won as jitters in the industry remains.
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