Samsung shares soared on the announcement of an $7B share buyback plan

Samsung shares jumped after South Korea’s largest company revealed a surprise plan to buy back approximately 10 trillion won ($7.2 billion) of its own stock over the next year.

Samsung Stock Surges After Surprise $7.2 Billion Buyback Announcement

Samsung's stock surged by as much as 7.3% in Seoul trading on Monday, building on a 7.2% gain on Friday ahead of the announcement. Despite this recent rally, the shares are still down roughly 27% for the year, driven by concerns that its memory chip business is lagging in the fast-growing artificial intelligence (AI) market.

Analysts believe the buyback could serve as a catalyst for the stock, with some suggesting it might also strengthen the control of the founding family over the company. In contrast, shares of competitor SK Hynix Inc. have risen about 24% this year, buoyed by investor optimism over its AI chips.

"The unexpected buyback is a positive surprise, and we think Samsung’s management is taking proactive steps to prevent further declines in its share price," wrote JPMorgan Chase & Co. analyst Jay Kwon in a research note. "However, we believe that restructuring and a clear strategy to regain tech leadership will be more critical for the stock’s long-term performance."

In the first phase of the buyback, Samsung will repurchase approximately 3 trillion won worth of shares, starting Monday and continuing through February 2025. All of these shares will be canceled. The board will also deliberate on how to best allocate the remaining 7 trillion won.

Sanghyun Park of Clepsydra Capital, notes that the buyback will help the founding family strengthen its control of the company by reducing shares held externally. He also notes it may help them with collateral issues on loans tied to inheritance tax bills.

“Local desks have been buzzing since last week about Samsung potentially pulling a short-term price pop to deal with the family’s collateral squeeze,” Park wrote in a note on Smartkarma. “The stock’s probably gonna camp comfortably above the 53,000 won margin call danger zone for a while.”

Samsung Stock Rises Most in Nearly Four Years

Samsung's stock jumped as much as 8.6% on Friday, breaking a five-day losing streak.

Despite the recent rally, the company’s shares are still down nearly 32% this year, weighed down by concerns over its lag in the artificial intelligence (AI) boom and the potential impact of Donald Trump’s protectionist trade policies. While some traders attribute Friday's surge to technical factors, it remains uncertain whether the gains will hold.

Daiwa Securities analyst SK Kim described the price increase as a “technical rebound from below 50,000 won ($35.70),” which is positive for investor sentiment. The stock was trading at 53,800 won in mid-afternoon, with the 50,000-won level considered a key psychological support point for South Korean retail investors.

The stock is currently trading at more than a 10% discount to the consensus estimate for its one-year forward book value, according to Bloomberg data, leading some investors to remain cautious about its future prospects.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.