It’s a Samsung Electronics (0005930KS) kind of morning, as a disappointing profit forecast from the company casts a long shadow of the technology landscape.
Samsung said late yesterday it expects June-quarter profit of 14.8 trillion South Korean Won, at the mid-point of its range, missing consensus for ₩15.1 trillion, and revenue of ₩58 trillion, missing consensus for ₩60.3 trillion, as related byThe Wall Street Journal’s Timothy Martin.
The Journal’s Jacky Wong points out this was the first quarter to quarter decline in operating profit in almost two years.
While Samsung did not offer full details of its various operating divisions—the actual earnings report comes July 31—one disappointment was lower-than-expected sales of its “Galaxy S9” smartphone. Another was the decline in NAND memory-chip prices, which the Journal’s Martin takes to mean that the memory-chip businesses’s “flushest days look to be over.”
Samsung shares declined 1,050 Won in Friday’s trading, 2.3%, to close at 44,900. Micron Technology (MU) shares are withstanding the ominous NAND indication, rising 11 cents to $52.95.
Mehdi Hosseini with Susquehanna Financial, who has a Neutral rating on Samsung shares, writes that the shortfall is attributable to “weaker” demand for the Galaxy S9, “weaker” operations in the company’s division that makes LCD screens, and weakness as well in its contract chip-making unit.
Hosseini thinks when July 31 rolls around, Samsung’s commentary about trends for the second half of the year will also disappoint.
Hosseini thinks NAND flash chip prices probably declined by 12% in the quarter from the previous quarter. He thinks shipments of the Galaxy S9 were 8 million, below prior expectations for 10 million units. And for all of this year, Hosseini is expecting total shipments of 33 million, less than the 40 million the company had led the Street to expect.
Apple Gets a Lift From Samsung Woes
BTIG Research’s Walter Piecyk thinks Samsung’s pain is a lift to Apple (AAPL). He draws upon research by market research firm Wave7, which he claims shows Apple’s market share in the June quarter rising by 3.5 percentage points, to 58.0%. That would be Apple’s highest share since February of last year,
“Its gains principally came from Samsung as the Galaxy S9 launch provided less of lift in share this year and it cooled off faster when compared to prior Galaxy S models, based on the Wave7 data,” he writes.
All that adds up to Apple being able to meet consensus expectations for the June quarter, writes Piecyk.
Apple shares are up $2.26, or 1.2%, to $187.66.
Amazon’s Prime Time
Did you know that Amazon.com (AMZN) is having another one of its “Prime Day” promotional events? This takes place July 16 and 17, and is the company’s fourth such annual promotion.
Youssef Squali with Suntrust Robinson Humphrey today reiterates a Buy rating, writing that the promotion is actually in full swing because Amazon has been running “deals” on its private-label goods, including electronics, apparel and accessories, “effectively turning Prime Day into a two-week deal extravaganza.”
While these deals can erode the profit margin benefit that Amazon should see for its private-label sales, “it offers a meaningful brand awareness opportunity, in our view, which could help drive future sales.”
The point of all the private-label stuff, writes Squali, is really “provide an unrivaled user experience” that increases “user retention” over time.
He notes that a recently introduced private-label Brand, Solimo, sells beauty and grooming products, and food and beverages, among other things. Solimo brings Amazon’s stable of private brands to over 100 by his count.
Amazon shares today are up $12.93, or 0.8%, to $1,712.66.
Keeping the Faith With Alibaba
There’s been a rush of Alibaba Group Holding (BABA) coverage this morning, with estimates for the company’s June-ending fiscal Q1 results generally being adjusted lower for a number of reasons, but bulls are sticking by the stock, and the technical trading view sounds favorable.
For example, Shyam Patil with Susquehanna reiterates a “Positive” rating on the shares, and a $305 price target, but reduces his estimates to account for the timing of Alibaba’s takeover of Chinese delivery service Ele.me, a startup in which Alibaba is expanding a stake to full ownership. That takeover happened in the middle of the quarter, later than previously expected, he observes.
Patil likes the Ele.me deal, writing that Ele.me “has clear synergies with BABA’s overall new retail and logistics initiatives.
“We expect BABA to invest aggressively in the business over the coming quarters to grow market share and capitalize on the potential synergies.”
Suntrust’s Squali reiterates a Buy rating on Alibaba, but he also cuts his price target to $215 from $235, after cutting estimates for the later-than-expected consolidation of Ele.me. But he also cuts his estimates for Alibaba’s cloud-computing operations, writing that “Alibaba Cloud is unlikely to maintain triple digit growth (we note AWS was growing at ~70% at a similar size) and thus we are tweaking our 1Q/FY growth assumptions lower.”
For the options trade, MKM Partners options strategist JC O’Hara offers that the stock’s “price has consolidated over the last past few months and now sits on its rising 200 DMA,” and that the “longer term trend indicator has previously acted as support.”
“The technical indicator of RSI is sufficiently oversold and near levels where BABA has bounced before,” observes O’Hara. “In our opinion, we believe BABA is oversold in an uptrend while sitting on support, thus there is a strong opportunity for a bounce higher.”
(O’Hara’s colleague Rob Sandersonyesterday was upbeat on Alibaba’s American depositary receipts, arguing that recent stock weakness on the fluctuation in the Chinese Yuan should not be taken too seriously.)
Alibaba ADRs today are up $4.35, or 2.3%, to $191.23.
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