Samsung Share Price Drops as Second Broker Cuts Profit Estimate

on Jun 11, 2013

Samsung Electronics Co (KRX:005930) took a hit on Tuesday, June 11 after Morgan Stanley followed JP Morgan in cutting profit estimates for this year, citing weaker demand for handsets. This has led to a decline in Samsung’s share price by 2.5 percent to a close of KRW1,389,000 in Seoul, the lowest level since January 28.

**Lowering profit estimates**
As iNVEZZ recently reported, (Samsung Share Price Plunges after JPMorgan Cuts Sales and Profit Estimates), JPMorgan Chase & Co last week cut its profit estimate for the world’s largest smartphone manufacturer, citing slowing demand for Samsung’s flagship smartphone, the Galaxy S IV. Less than a week later Morgan Stanley followed suit. Yesterday, the broker said it lowered its annual earnings estimates for Samsung by 1.6 percent as it trimmed sales projections for the S IV to 61 million units from 71 million.

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Galaxy S IV has become the fastest selling smartphone in Samsung’s history. The company has shipped four million units over the launch weekend and hit the 10 million-units-sold mark in 27 days – almost twice as fast as the S IV predecessor, the S III. However, with a second leading broker having cut its estimates for the sales of the handset, concerns over long-term demand for the smartphone have surfaced.

“Galaxy S4 sell-through is running lower at Samsung, which has recently reduced monthly orders of components from its suppliers,” Morgan Stanley’s Shawn Kim wrote in a report, as quoted by Bloomberg. “Sell-through demand appears lower than our previous estimate.”
The newswire also quoted Kim Jae Dong, a fund manager at Baring Asset Management Korea Ltd., as saying that the market was worried over the S IV sales outlook. “Many investors seem to be opting to reduce their portion of Samsung shares for the time being,” Dong said.

**New additions**
!m[KRX:005930, NASDAQ:AAPL](/uploads/story/2975/thumbs/pic_1_inline.jpg)
The cuts in profit estimates signal that Samsung could be facing serious pressure later in the year in its race with Apple Inc. (NASDAQ:AAPL). The South Korean company currently dominates the market with some 69.4 million smartphones shipped in the January-March quarter, compared to Apple’s 37.4 million units sold during the same period. However, Samsung’s lead may narrow significantly by the end of the year, as Apple is expected to unveil new products (presumably the next iPhone) in the third quarter of 2013.
Samsung will also unveil new products in London on June 20. A smaller and less-powerful version of the S IV called S IV Mini and a new Android-based tabled powered by an Intel Corp processor are among the products expected to be presented at the event.
**The Samsung share price was KRW1,389,000 as of 14.30 GMT.**


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