Samsung stock takes huge hit as Galaxy S4 sales slow down and profit margins thin
The Galaxy S4 wasn’t launched too long ago and it feels like yesterday that Samsung was boasting about their first month sales. A short while has passed and things aren’t as rosy as they once were.
Both the Wallstreet Journal and Reuters are reporting that Samsung has lost about $12 billion in market value on Friday. The reason for this are concerns of slowing sales of the flagship device. An analyst at Shinhan Investment Corp re-iterated this point. “Sales of high-end handsets are lagging behind expectations, while low- to mid-end handsets are selling briskly worldwide,”
People may not see the big deal considering Samsung themselves provide a large line-up of products that include low and mid-end devices. The problem with these is that they’re sold at smaller margins than their flagship counterparts so they make less profit for each device sold. The analyst continued on. “As the portion of low- to mid-range handsets is expected to increase in Samsung’s overall mobile phone business, this has also sparked concerns about thinning margins and lower growth.”
Combine this with word that Apple is planning to release their own low-cost iPhone as well as their new flagship iPhone 5S and it’s understandable why investors are concerned. If things are slowing down now, it will only get tougher as the year goes on.
Brokerage downgrades and slashed estimates from investors have to be a concern for the hardware giant. There is also concern that Samsung doesn’t have the “creative innovation” needed to do what Apple has done with the iPod, iPad, and iPhone by creating brand new segments, or new markets that they can establish and then be leaders of growth in those new areas.
Samsung is still making a lot of money and are still making solid products but all of these concerns are legitimate and the next year or so will be big for the company. It will be interesting to see if they step up to the plate in a big way or continue to play the same game.