This Japanese memory maker fell 40% in July — analysts see a buying opportunity
Kioxia ‘s shares are still on a growth trajectory, even after a 40% decline in the past month, thanks to its steady earnings growth, higher demand for its chips amid the AI boom. Shares of the Japanese semiconductor maker closed 5.6% higher on Monday after the company posted quarterly earnings late Friday. The stock is up over 370% year-to-date. 285A.T-JP YTD mountain Kioxia Kioxia’s operating profit in the April-June quarter surged to 1.27 trillion yen ($8.11 billion), up from 44.9 billion yen a year earlier, while revenue gained more than fivefold from a year earlier to 1.77 trillion yen. An increase in bit shipments — which refers to memory capacity — a weaker yen, and strong demand from AI-focused data centers helped to support its earnings, the company said. Analysts are optimistic about the company’s outlook, even after a recent tech rout in U.S. and Asian markets weighed on the stock. Investors were concerned about the sustainability of AI spending in the sector and whether capacity additions by competitors, like TSMC or SK Hynix, would lead to weaker memory prices. Technical selling by Korean leveraged exchange-traded funds (ETFs) also weighed on sentiment toward Japanese tech-related stocks like Kioxia. “We understand now that forced selling by a large hedge fund in Memory stocks contributed significantly to the volatility of these companies’ share prices in July, ” Richard Kaye, portfolio manager for Japanese Equities at Comgest, told CNBC. “That negative factor seems to have been lifted,” Kaye said, adding that Kioxia’s quarterly and multiyear outlook, and valuation, “remain compelling.” The recent selloff also appears overdone, said Jing Jie Yu, Morningstar’s equity analyst. “Near-term fundamentals remain strong to us despite the softer headline print from Korean memory leaders,” Yu added. Despite the headwinds, Kioxia’s competitive advantages over its peers have helped to support its share price. “NAND supply-demand remain extremely tight, Kioxia has capacity booked out two years, and Kioxia retains manufacturing and product advantages which will support its average price in addition to the preexisting tightness in the market,” Kaye said. The company’s planned share buyback of up to 800 billion yen is “positive,” Nomura said in a report, adding that the company “decided to carry out a share buyback in view of the current share price, and that this would have no impact on dividends going forward.” The company’s expectations of growth in both bit shipment volumes and prices also provided reassurance to investors, “given the decline in stock market expectations for price rises over the last month,” Nomura said.
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