Thursday, March 28, 2024

Samsung earnings miss target as Galaxy S6 sales fall off

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Yesterday analysts were still expressing some limited optimism regarding Samsung’s financial performance for the year. Park Jung-hoon with HDC Asset Management noted that as long as the earnings number did not start with a “6” then there would not be any shock for investors. Today Samsung released their guidance for the second quarter and it turns the projections are a bit shocking as operating profit is projected to be 6.9 trillion won ($6.1 billion USD). This level represents a 4 percent annual decline and is the seventh consecutive quarter of declines for Samsung. Perhaps the worst part for Samsung is that the trouble is being attributed to their mobile business despite Samsung being the largest smartphone manufacturer in the world in terms of shipments.

Tom Kang with Counterpoint Research says,

“Samsung’s smartphone division is performing really poorly and its semiconductor business isn’t outperforming because weak overall demand for handsets is limiting semiconductor demand.”

Part of the smartphone division’s poor performance can be traced directly to the Galaxy S6 as “sales are falling off” according to Kang after an initial pop when the device was released. Samsung also missed an opportunity with the Galaxy S6 edge by not having sufficient manufacturing capacity ready for demand. Dohoon Lee with CIMB see the initial impact of the Galaxy S6 only continuing to fade over time. Kang goes even further to note that the Galaxy S6 is “not that popular among consumers at this point” and he thinks Samsung will have to lower the price to attract buyers. Despite these negatives, the Galaxy S6 is still expected to be Samsung’s best selling smartphone ever.

Analysts also noted the weakening demand for handsets, which is eroding Samsung’s semiconductor business. If there is any silver lining, it is that investors appear to have mostly priced these results into the stock price, so the price is not moving much and even experienced a small bump.

source: Samsung
via: CNBC

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