Samsung Stock Closes Down 4.6%, Cutting $8B Off Its Market Value As Investors Worry
Samsung isn't off to a great start for 2014 – during its first full day of trading of the new year, it lost 4.6 percent of its stock price value, which amounts to a more than $8 billion drop in market value, as reported by the Wall Street Journal. The drop is likely attributable to increasing lack of confidence from investors in Samsung's ability to continue to grow its mobile business.
Outlook for the company's upcoming quarterly results are good – analysts estimate that they will see an increase in profit derived from their mobile business, which is the big powerhouse at the company when it comes to driving earnings. But that increase will be off the pace from the previous quarter, and the fear is that in general Samsung's ability to continue to see increasing gains in its mobile business has come to an end.
The problem for Samsung comes from a number of different developments in the mobile market over the past year. First, there's the fact that smartphone penetration at the top-end of the market is now pretty wide-reaching, meaning there's theoretically much less opportunity to sell high-end devices than there might have been previously.
There's also ample price pressure making its way into the world of smartphone sales. Google's Nexus devices continue to set examples for high quality hardware at lower, contract free prices, and now Motorola is also offering extreme value for money with the $179 Moto G, and the just-reduced Moto X at $399, a price drop made permanent earlier this week. To compete with Google and the Google-owned Motorola on price, Samsung would inevitably find margins on its products to be lower than usual since the budget devices become more important, driving down mobile profit overall.
Samsung held a conference designed specifically to address the concerns of analysts and investors back in November last year, where it tried to reassure its backers and market watchers that it had the right plans in place to continue growth. Despite that, investors seem unconvinced: stock price was mostly flat coming out of that event, and both for the last day of 2013 and now the first day of 2014, price has dipped considerably.
Darrell Etherington 02 Jan, 2014
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Source: http://techcrunch.com/2014/01/02/samsung-stock-closes-down-4-6-cutting-8b-off-its-market-value-as-investors-worry/
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