Bank of America Is Bullish on SK hynix Stock as the Memory Chip Market Stays Tight

SK hynix (SKHY) is starting to come back strong, especially with analysts at Bank of America out with a “Buy” rating and a $250 price target. In fact, analysts were far more bullish after a recent virtual memory tour, seeing tight memory supplies, strong demand for high-end chips, and more customers signing long-term deals as reasons for optimism. 

 

Memory Demand Isn’t a Problem for SK hynix

Regarding the memory supply shortage, some companies are cutting back on the amount of memory they put into technology, such as PCs and smartphones. However, as analysts led by Simon Woo said, “de-spec [which means memory content cut per box or GPU/CPU] is mainly occurring in PCs/smartphones and low-end GPU/ASIC, but this should reflect memory chip shortages rather than demand cuts,” as quoted by Seeking Alpha.

In short, the firm doesn’t see demand dropping off. Instead, it’s seeing companies using less memory in some technology because companies can’t get enough supply. So, if SK hynix customers were cutting memory because consumers weren’t buying technology, that would be bad news for SK hynix. But in this case, memory is being cut because supply is limited. Moreover, most of that impacts “lower-end products.” With higher-end products, the analysts don’t expect to see substantial cuts to memory at all. As also quoted by Seeking Alpha, the analysts said, “…high-end applications (including next-gen GPUs) will continue to use high memory content (no de-spec).” 

Supply Won’t Catch Up to Demand Quick Enough

We also have to consider that a fresh supply of memory chips will not flood the market any time soon. According to SK hynix, the shortage could last until the end of 2030, with no real signs of substantial supply coming online any time soon. Bank of America says that space is limited, which means the industry can't simply flip a switch and dramatically increase production. That’s still good news for SK hynix, though. That’s because when there's strong demand and not enough supply, chipmakers have more room to keep prices and profit margins high.

In addition, SK hynix has reportedly extended its long-term deals. That's useful right now for the company, especially with tech giants needing substantial amounts of high-performance memory over the long haul.

SK hynix Could Return a Lot of Cash to Investors

SK hynix is also generating a lot of cash. In the company’s second-quarter earnings report, cash and cash equivalents grew to 88 trillion won, or $54.5 billion. With that, it launched a massive 40 trillion won ($28.7 billion) share buyback and cancellation program. Management said it was also committed to returning more than 50% of cumulative free cash flow to shareholders between 2025 and 2027 through buybacks and dividends. And analysts at Bank of America said they expect the company to return 30 trillion won in dividends based on its 2026 results.

Bank of America also believes the company could have another 15 trillion won in free cash flow available after accounting for its expected dividend and buyback. The firm thinks that money could potentially be returned to shareholders after the company's annual meeting in March 2027. In addition, the firm believes SK hynix could generate more than 200 trillion won in free cash flow in 2027 if the current memory boom continues. 

What Do Analysts Say About SKHY Stock?

The company is benefiting from several trends at once: strong AI demand, limited memory supply, high demand for advanced chips, and more long-term deals with customers. In addition, Bank of America is sticking with its bullish call, with a $250 price target. Overall, SK hynix has a consensus “Strong Buy” rating. Of the 16 analysts covering the SKHY stock, 12 have a “Strong Buy” rating, two have a “Moderate Buy” rating, and two have a “Hold” rating. The mean target price of $247.40 implies a potential upside of 31%. Meanwhile, the high price target of $320 implies a potential upside of 69% from here.

On the date of publication, Ian Cooper did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.