Along with reporting its first quarter earnings that came in line with market expectations, Samsung Electronics today delivered some distressing news for its biggest rival, Apple (AAPL). The Korean company said its overall results were dragged by weakness in its unit that makes OLED screens for its own high-end smartphones as well as the iPhone X.
Samsung expects the weakness to continue in the second quarter and is working on a cost-optimization plan to tackle its impact. A slowdown in iPhone X sales and rumors that the company may stop its production completely had earlier spread hysteria among Apple investors. The report from Samsung, in fact, further testifies that iPhone unit sales are indeed facing a weakness. The report comes at a time when rumors are doing rounds that Chinese rival Xiaomi is planning for an IPO.
Reports of the weakness first emerged when numerous chipmakers including Taiwan Semiconductor Manufacturing (TSM) lowered their guidance for the first half of the year citing a slowdown in smartphone demand. Add to that a recent report by Gfk shows that global smartphone demand slid 2% in the first quarter of 2018, primarily due to sluggishness in China and the US. Apple’s Austria-based supplier of optical sensors for iPhone X, AMS, also cut down its sales forecast for second quarter by half sequentially.
This is particularly worrying for Apple, which depends largely on iPhone unit sales to drive revenue. Unless the Cupertino, California-based tech giant comes up with some spectacular capital return announcements at the earnings conference after the closing bell on May 1, there are high chances the stock may see a dip. And this is where you come in.
Samsung reported a 58% jump in operating profits to $14.4 billion in its first quarter, on a 20% jump in revenue to $50.6 billion, riding on strong demand for its memory chips.
Let’s start with a gentle reminder that the quarter ending March is periodically the weakest season for Apple. Also, it is likely that an increase in the average selling price of its handsets will boost its sales in the upcoming quarters. Guggenheim analyst Robert Cihra predicts a 14% growth in smartphone revenues for Apple by the end of its fourth fiscal quarter. This could be your best chance to grab some shares.
Samsung profit jumps 58%
The Galaxy series smartphone maker and Apple’s biggest rival reported a 58% jump in operating profits to $14.4 billion in its first quarter, on a 20% jump in revenue to $50.6 billion, riding on strong demand for its memory chips.
Revenue from memory chips for the quarter soared over 40% to $16 billion during this period.
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