Samsung Dampens Expectation Of A Turnaround Due To Flagging Smartphone Sales Prospects
Doubts over the sales prospects of Samsung Electronics Co. Ltd.'s new flagship smartphones are dampening expectations of a rapid turnaround for the South Korean giant.
Samsung Electronics (OTCMKTS:SSNLF) is not betting on a turnaround in its sales revenue from its flagship smartphones, especially the upcoming new models, even though it is likely to help the company pull in profit as it recovers from its troughs of last year.
When the company peaked in mid-March, due to favorable reviews of its Galaxy S6 Models, its share price has nosedived by more than 6% for the year as a whole, due to supply shortages for the design of Samsung Galaxy 6, as well as economic conditions in China and Europe, following political and economic turmoil in Greece. Samsung is due to issue its second quarter revenue guidance and profits tomorrow, with full results expected by the end of the current month.
Samsung is optimistic about the newly released phones and expects them to be the best selling ones to date. Data from Counterpoint shows that in the month of June alone, the Korean giant sold at least 6 million units of its S6 Galaxy phones, outpacing its predecessor, Galaxy S5, at the same month.
Analysts believe that the company missed the trick here by not anticipating the demand for S6 clearly, resulting in a missed opportunity for the South Korean conglomerate. Whilst the capacity has been upgraded, as claimed by the company, it will have to contend with new Apple Inc.’s iPhones models that will be rolled out in September this year.
According to a Thomson Reuters I/B/E/S survey, 2015 profits are tipped at less than 28 trillion won, a rise from a three-year low of 25 trillion won last year. Third and fourth quarter for this year are pegged at 7.3 trillion won and 7.5 trillion won respectively, both significant gains from the third and fourth quarters of previous years.
According to a similar survey of less than 40 analysts, April-June operating profits are tipped at more than 7 trillion won, almost the same as that of a year earlier, and way up from the less than 6 trillion won earlier this year.
KTB investment analyst, Jin Sung-hye, say that as the smartphone market shows maturity, the consumer demand for high end product has gotten shorter due to the fact that rivals keep pumping out new types of models once every two quarters, making the market hyper competitive. Sung has cut estimate of 2015 Galaxy S6 shipments forecast to 45 million from 49 million.
Samsung Electronics stock price ended the day at 1,230,000.00 worn-down 3% from the preceding week.
