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Investing.com - Morgan Stanley (NYSE:MS) has upgraded Samsung (KS:005930) Electro-Mechanics Co Ltd. (KS:009150) from Equalweight to Overweight, while significantly raising its price target to KRW198,000 from KRW133,000.
The upgrade comes as Morgan Stanley identifies Samsung Electro-Mechanics ’ substrate business as a key beneficiary of Tesla (NASDAQ:TSLA)’s next generation US$17 billion AI chips contract with Samsung foundry, which will involve supplying ABF substrates for AI FSD chips.
Morgan Stanley also highlighted additional growth opportunities through ASIC customers, citing "large order wins and substantial content increase amid increasing complexity in ABF multilayer core."
The firm expects improved free cash flow by 2026, driven by top-line growth versus current under-utilization in both MLCC (Multi-Layer Ceramic Capacitors) and substrates businesses, which should support debt reduction and create improved dividend opportunities.
While the second half of 2025 earnings outlook appears less promising due to tariff-led pull-ins, Morgan Stanley anticipates a gradual recovery in the MLCC cycle with "green shoots of recovery" likely from 2026, potentially strengthened by demand normalization if tariff certainty improves.
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