Samsung stock receives an upgrade after Tesla contract win

Macquarie upgraded Samsung Electronics to Outperform, setting a 95,000 Korean won target price (37% TSR), citing a confirmed 22.8 trillion won foundry deal with Tesla for 2nm AI6 chips from 2027 to 2033. This strategic contract is expected to boost fab utilization and serve as a crucial reference for future advanced projects, while Samsung's strong position in the conventional DRAM upcycle, projected to last until 2026, further underpins Macquarie's decision to raise 2026 and 2027 operating profit estimates by 19% and 16% respectively.

Analysis

Macquarie has upgraded Samsung Electronics to Outperform with a 95,000 Korean won price target, implying a 37% total shareholder return, based on a multi-faceted positive outlook. The primary catalyst is a newly confirmed 22.8 trillion won foundry contract with Tesla, scheduled from 2027 to 2033 for the production of 2nm AI6 chips. While Macquarie estimates this deal will generate approximately 2.9 trillion won in annual revenue, its strategic value is paramount. This contract is expected to significantly improve fab utilization and serve as a crucial reference win, potentially attracting other major clients like Qualcomm or AMD and validating Samsung's capabilities in advanced process nodes. Although initial contribution margins may be modest due to depreciation costs at the new Taylor, Texas facility, the long-term strategic benefit is clear. This foundry recovery is complemented by a strong, sustainable upcycle in the conventional DRAM market, which is projected to last into 2026 and where Samsung is positioned to gain market share. This dual-engine growth outlook prompted Macquarie to raise its 2026 and 2027 operating profit estimates for Samsung by 19% and 16% respectively, factoring in higher DRAM prices and reduced foundry losses.

Key Decisions for Investors

• Investors should evaluate Samsung's dual growth drivers: the strategic, long-term validation provided by the Tesla foundry contract and the more immediate financial tailwind from the strong DRAM market upcycle.
• Given that significant revenue from the Tesla deal will not materialize until 2027, this should be viewed as a long-term strategic play, with near-term performance more closely tied to the robust DRAM cycle.
• Key performance indicators to monitor are Samsung's ability to secure additional advanced node foundry clients, which would validate the 'reference win' thesis, and any acceleration in its HBM business, which currently represents a long-term upside option.