SK Hynix (NASDAQ:SKHYV) stock surged by over 13% on Friday as the South Korean giant made its US debut, raising over $26 billion. This jump happened as brokers rushed to fill its substantial orders as the IPO was highly subscribed.
SK’s jump coincided with the recovery of most memory stocks on Friday. Micron (NASDAQ:MU) rose to $980, while SanDisk (NASDAQ:SNDK) rose by over 1%. Internationally, memory companies like Kioxia and Samsung were also in the green.
SK Hynix aims to use the windfall to boost its manufacturing operations in South Korea as it seeks to solidify its market share. Together with Samsung, the companies aim to invest over $500 billion in South Korea in the coming years.
The company’s business is having the best year, helped by the rising demand for its memory products. This growth has pushed its revenue much higher, with the CEO predicting that the memory boom will last through 2030.
The most recent results showed that SK Hynix’s revenue jumped by 198% YoY to KRW 52.58 trillion ($39 billion), with its operating profit soaring to KRW37.4 trillion. This growth likely continued, as evidenced by the recent Samsung and Micron earnings.
History Suggests SK Hynix Stock Will Pullback
SK Hynix stock jumped as demand among US retail and institutional investors remained at an elevated level.
Still, history suggests that the stock will retreat in the coming weeks as demand fizzles. This is exactly what happened to most of the recently launched IPOs.
A good example of this is SpaceX (NASDAQ:SPCX), which jumped to $225 after its IPO. It then started a slow downward trend, and reached a record low of $145, even after its Nasdaq 100 inclusion.
Similarly, Circle Internet (NASDAQ:CRCL) initially jumped from $50 to $300 shortly after its IPO, and then plunged to a low of $49. Figma (NYSE:FIG) initially soared to $142 and then dropped to $16. Other recent IPOs like Medline, Gemini Space Station, Klarna, and Bullish initially soared and then pulled back.
Fundamentally, SK Hynix’s business is still strong, but potential risks remain. One of these risks is that the memory industry has always been highly cyclical.
In this, periods of high demand are then followed by high inventories and low prices. A good example of this is what happened in 2023 when its annual revenue dropped to $24.9 billion from $34.6 billion a year earlier.
Image: Shutterstock
Login to comment