Investing.com -- Barclays on Tuesday initiated coverage of SK Hynix’s (NASDAQ: SKHY) newly-listed American Depositary Receipts (ADRs) with an Overweight rating and a price target of $330, implying upside of nearly 117% from Monday’s closing price of $152.35.

Analysts Simon Coles believes industry supply tightness is set to worsen in 2027 with only limited improvement in 2028, underpinning "further significant growth from here."

The bank’s global DRAM model shows bit supply growing 20% year-over-year in 2027, failing to keep pace with bit demand growth it expects to accelerate to 35%, resulting in "continued tightness for a number of years yet."

Coles’ remarks come as Barclays switched its coverage from the Korea-listed shares to the ADRs. Trading under the ticker symbol "SKHY" on Nasdaq, SK Hynix priced its ADRs at $149 apiece on Thursday, raising approximately $26.5 billion, according to a U.S. regulatory filing.

Following a week of investor meetings in the U.S., Coles said the central debate remains "whether this time is different," with investors largely unconvinced. Feedback centered on skepticism that long-term agreements (LTAs) would protect pricing in a severe downturn, and on how memory stocks trading at mid-single-digit price-to-earnings ratios can be reconciled with semiconductor capital equipment names trading at 30-40x.

Coles said he views memory as "too cheap, but they are related" to the equipment names.

The analyst also flagged that China’s memory ecosystem is progressing rapidly in DRAM and NAND, with the top Chinese DRAM player’s DDR5 yield improving to more than 75% by the end of 2025 and bit shipments estimated to grow 55% year-over-year in 2025 and 48% in 2026.

Even so, Coles estimates any Chinese share gains in DRAM outside China would free up only 1-4% of capacity at Samsung, SK Hynix and Micron combined, concluding he sees "limited impact on the global DRAM market landscape for now unless global CSPs start to use China DRAM for datacentre products." He also noted the top Chinese DRAM player’s HBM3 development remains delayed, with mass production likely pushed to 2027.

Among individual names, Coles expects SK Hynix to keep its HBM lead, saying perceived technology disadvantages relative to Samsung should be "neutralised by HBM4E," with the company retaining a 50%-plus HBM share for years.

He furthermore flagged a shift in the investment case toward capital returns, estimating SK Hynix will hold cash equivalent to more than 40% of its current market cap by the end of 2027, which provides "ample opportunity to boost earnings growth through share buybacks."

Even with average selling prices flat from 2027 and declining modestly from 2028, Barclays models earnings-per-share growth at a double-digit rate in 2028, assuming a $50 billion buyback.