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Analysts Lower Forecasts For Samsung Despite Robust Profits

July 6, 2015 - Written By Kishalaya Kundu

After going through a few quarters of declining market share and dwindling profits, South Korean electronics manufacturer Samsung’s fortunes have started changing for the better in recent times. Its latest flagship smartphones, the Galaxy S6 and S6 Edge, have outpaced sales of the last generation Galaxy S5, but according to market analysts in Seoul, the recovery still falls short of market expectations, which has led to the company’s stock price trading 6 percent lower since the beginning of the year. While analysts believe the growth in both revenues and profits is likely to continue in the near term, the upward curve in not as steep as many would have hoped for.

In March this year, the Samsung stock was at its highest levels for the year in expectations of bumper sales. Data released by Counterpoint however, shows the company has managed to sell only 6 million of its flagship devices in the month of April amidst growing economic uncertainty in China and the Euro zone. Analysts also lament what they’ve termed a “lost opportunity”, as Samsung reportedly underestimated the demand for its S6 Edge, resulting in the company being unable to fully exploit the novelty factor of the device, thereby losing out on sales. KTB Investment analyst Ms. Jin Sung-hye said, “As the smartphone market matures, the period of time that consumer demand for a high-end product lasts looks to have gotten shorter”, explaining why the recent capacity expansion may be a case of too little, too late for Samsung. She also cut the shipment forecast for the Galaxy S6 from her previous estimate of 49 million down to 45 million for calendar year 2015. The company is expected to release its Q2, 2015 earnings guidance in a meeting with analysts in Seoul on Monday. The full report is said to come at the end of this month.

According to a survey of 39 analysts conducted by Thomson Reuters I/B/E/S, Samsung’s operating profit for the April-June quarter stood at 7.2 trillion won ($6.3 billion). Although the figure represents a 20% growth in sequential terms from the Jan-March quarter this year, it also signifies stagnated growth in Y-o-Y terms, from Q2, 2014. 20 out of the 39 analysts surveyed have cut their revenue forecasts by an average of 3.9 percent, over the past month. The survey seems to suggest that the company’s overall profit for the year 2015 will improve to 27.8 trillion won (around $24.5 billion), which will be a recovery from a three-year low of 25 trillion won (around $22 billion) in 2014. Analysts also expect Samsung’s Q3 and Q4 profits to be around 7.3 trillion won ($6.5 billion) and 7.5 trillion won ($6.6 billion) respectively, which would both be significant gains in annual terms.