Barclays Sees 100% Upside for SK Hynix ADR; Shares Surge 27%

A bullish report from Wall Street has suggested that the American Depositary Receipts (ADRs) of SK Hynix, recently listed in the United States, have the potential to double in value.

As option trading and leveraged exchange-traded fund (ETF) transactions based on SK Hynix ADRs officially kicked off on the New York stock market, the ADR price surged by nearly 30 percent.

According to the financial news outlet Investing.com on July 14 (local time), Barclays analyst Simon Coles set a target price of 330 dollars for SK Hynix ADRs, citing expectations that the memory supply shortage will persist.

This target price is 117 percent higher than the closing price on July 13.

Barclays projected that the supply shortage in the memory semiconductor industry will intensify in 2027 and show only limited improvement in 2028, indicating that the tight supply situation will continue for several years.

Barclays also assessed that memory semiconductor stocks are currently "excessively undervalued."

Previously, Bloomberg reported that as of July 9, the 12-month forward price-to-earnings (P/E) ratio of the KOSPI was 6.35, which is lower than the 6.82 recorded on October 26, 2008, during the height of the financial crisis.

This was influenced by the fact that the P/E ratios of Samsung Electronics and SK Hynix, which account for more than half of the KOSPI market capitalization, remain in the mid-single digits.

Meanwhile, Barclays predicted that the impact of competition from Chinese semiconductor companies would be limited.

Regarding the influence of Chinese firms, Barclays wrote, "Unless global cloud service providers begin using Chinese DRAM for their data center products, the impact on the global DRAM market structure remains limited for now."

Barclays also estimated that SK Hynix would hold cash equivalents exceeding 40 percent of its current market capitalization by the end of 2027, expecting a continued expansion of share buybacks.

As optimism for memory semiconductors revived due to the ongoing artificial intelligence (AI) investment boom, SK Hynix ADRs closed at 193.92 dollars on the New York stock market that day, a 27.29 percent jump from the previous session.

Option trading and leveraged ETF products related to SK Hynix also began in earnest on that day.

According to CBOE LiveVol data cited by CNBC, approximately 150,000 SK Hynix-related options were traded by noon that day.

The CBOE offered five types of options expiring on the third Friday of July, August, September, December, and March 2027, respectively.

Leveraged ETFs linked to SK Hynix ADRs also saw trading begin in earnest.

CNBC reported that nearly 10 U.S. ETF managers, including Leverage Shares, GraniteShares, ProShares, and Kurv Funds, had applied to launch SK Hynix leveraged ETFs, and many of them began trading on that day.

While single-stock leveraged ETF products for Samsung Electronics and SK Hynix in the Korean stock market have been identified as one of the causes of extreme stock price volatility for those companies, some analysts suggest that the launch of related products in the U.S. market may have contributed to the expansion of the stock price increase that day.

There was also analysis that the premium of the ADR compared to the price of the original shares listed in Korea exceeded 50 percent due to the surge in SK Hynix ADRs that day.

Bloomberg assessed that with the 27 percent surge in the ADR that day, the premium gap between the original shares (based on the July 13 closing price) and the ADR widened to 51 percent, which is significantly higher than the 3 percent set at the time of the ADR listing.

Bloomberg explained, "As there are restrictions on converting SK Hynix original shares into ADRs, it has been expected that the ADRs would trade at a higher price than the converted price of the shares listed in Seoul."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.