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Samsung Struggles to Fix their Smartphone Woes

1af 55 samsung

On September 21 we posted a report titled "Things Look Gloomy Again for Samsung as Korean Analysts Cut Q3 Estimates." With analysts continually cutting expectations for Samsung, the company may be able to squeak out a nice make-believe recovery for Q3 if you haven't been following the downgrade cycle. In fact, Reuters notes today that "The world's largest handset maker is forecast on Wednesday to guide for its first annual increase in quarterly profit in two years following a dismal third quarter in 2014, but profits and mobile margins are expected to contract on a sequential basis." Yes, after so many downgrades, it will look like a real rebound is in play when it's not.


Kim Hyun-su, fund manager for IBK Asset Management weighed in by stating that "Samsung is at a standstill. It's having trouble finding a way to create new demand for its smartphones."


The South Korean electronics giant's stock trades at a forward price-to-book ratio of 0.9 - the lowest since 2002, according to Thomson Reuters data.


Brokerage HMC Investment expects Samsung's mobile division's operating margin fell to 7.7 percent in the third quarter from 10.6 percent in April-June.


While overall phone shipments likely rose, the brokerage says the greater share of lower-end products and price cuts for the Galaxy S6 models weighed.


The bottom line is that the perceived-bounce in profits that we'll hear about shortly from Samsung stem from estimates that have been lowered several times. That's like going from the Adult table to the kids table for dinner. For more on Samsung's struggle, see the full Reuters report here.


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