Samsung hit by Galaxy S4 sales woes to the tune of $12 billion off the market valuation

by: Robert TriggsJune 7, 2013

Samsung Galaxy s2 Logo aa 2 1600

Following on from the pessimistic sales outlook for the Galaxy S4 which we first heard about yesterday, the company’s share price took a plunge in trading earlier today, knocking a substantial $12.4 billion off the market value of Samsung Electronics.

Samsung’s shares ended the session down 6.2 percent, pushing the stock down to its lowest level in four months and shrinking Samsung’s market capitalization to $187.8 billion. Ratings agency Fitch was particularly harsh on Thursday, stating that it was not planning to upgrade Samsung’s A+ rating in the medium term due to its heavy reliance on the “fickle” consumer electronics market.

Samsung share price drop June 7

Share prices gapped down significantly at the market open today, continuing a bearish move for the remainder of the trading session. Chart source: Google Finance

Other investors are stating that the main reasons for the selloff are weakening sales expectations and a lull in momentum for the Galaxy S4. Kim Young-chan, an analyst at Shinhan Investment Corp, put the problem down to a weaker than expected performance for high-end smartphones in general.

[quote qtext=”Sales of high-end handsets are lagging behind expectations, while low- to mid-end handsets are selling briskly worldwide” qperson=”” qsource=”” qposition=”center”]

J.J. Park, an analyst from J.P. Morgan, echoed similar concerns, stating that the third quarter shipments for the Galaxy S4 would likely disappoint many investors, leading to a downgrade in Samsung’s target share price. The Galaxy S4 is selling well with more than 10 million units shipped so far, and analysts had expected sales to reach more than 30 million by the third quarter. However, according to the J.P. Morgan report, the company may not perform quite as well as anticipated, as shipments are in decline in Europe and South Korea post launch.

[quote qtext=”Our supply chain checks show monthly orders have been cut 20%-30% to 7 to 8 million units starting July” qperson=”” qsource=”” qposition=”center”]

With so much hype and speculation surrounding the launch of the Galaxy S4, it’s always possible that the expectations were simply too high to begin with and that these results are simply a reality check for overly enthusiastic investors. Another factor to consider is that the high-end smartphone market is already quite saturated with products, and competition from the likes of the HTC One could well have hindered Samsung’s performance.

Conjecture concerning the next line-up of Apple products is further fuelling the uncertainty regarding Samsung’s future performance. Bloomberg is expecting Apple to start a trade-in program sometime this month to allow users to trade their older iPhones in the runup to the launch of its latest model, which could have a direct impact on Samsung’s bottom line.

Putting things in perspective however, the Galaxy S4 is still selling well, easily outpacing the Galaxy S3’s impressive launch figures. Samsung also has a strong line-up of other products which are meeting expectations. We’ll have to wait for the official figures before we can confirm exactly how well the Galaxy S4 has performed post launch. Whilst some may be disappointed, the Galaxy S4 is no doubt still going to rake in plenty of profit for Samsung for the foreseeable future.

  • Joshua Hill

    Love the photo of the galaxy S2. I’d say it and the Note 2 are Samsung’s best phones.

    • Vireak Rascal

      I agree with you. Because I still own both of them.

    • lollicup04

      what about the original galaxy note owners ._.

  • Luka Mlinar

    Maybe it’s because they released the same fing phone with a bigger engine. Samsung did nothing with the S4 except minor UI upgrades and a bigger processor. There is no more playing it safe. Even Apple will face the same fate if they keep rolling out the same phone.

    • Piyush

      or maybe htc one is selling really well :)

      • Luka Mlinar

        You’re a funny man :)

    • LumiPhoNexus

      I think Apple decided not to do gimmicks after negative reports on Siri

    • nishantsirohi123

      apple has been rolling out the same phone since iphone 4

  • icyrock1

    And here comes the apple effect. Once you get to a certain level, people start wanting you to fail.

    • amand

      I dont think so, this is the plastic effect, same design and similar build as last years model was a mistake. I have had some quality time with an S4 these last few days, it’s a good upgrade over s3 and note 2 but offers nothing that’s worth while over the Xperia Z. No thanx Samsung, this is really not gonna sweep competition away. Z for me still, S4 I’d nothing but an old design with poor materials.

      • nishantsirohi123

        well the materials used in S4 are not poor

        but yes the joke was on samsung with the S-4

        “if it looks the same…how will people know i upgraded”

        at least some different and unique color (like the titanium grey of note 2) instead of the same old white, where it is impossible to tell the two apart.

        samsung has become in terms of design like toyota, great products, dependable and you cannot go wrong with the choice you made, but in designs always playing safe

  • taz89

    No surprise here, investors think everything should be going up at the same rate each year, they don’t live in reality simple as…

  • DKJr

    Take with a pinch of salt….i really don’t trust the analysts at time. Downplay the sales, then come out with real numbers that are much higher, surprise everyone & make a killing. But there’s merit in what they say about the SG3 upgrade.

  • sfasljkas

    these are just forecasts and expectations (talking about sales), wait for samsung to verify them.

  • GeneralmotorsGravytrain

    Chances are expectations were too high to begin with. Greedy investors never seem to grasp the reality of this economy. They think everyone is just going see some long list of features on a smartphone and cough up their hard-earned cash every year. Not so. I’m sure the Galaxy S4 is selling rather well, but the sky is not the limit. There’s too much competition among all the various Android smartphones. The GS3 is rather inexpensive now and there’s no reason why most consumers wouldn’t be happy with it.

    Only the arrogant, know-it-all tech-heads are always chasing cutting edge products, acting as if a year-old smartphone is practically obsolete because it lacks the latest features. Eventually Samsung is going to come up against the “too many features” barrier. I think most consumers wouldn’t care if Samsung didn’t introduce another smartphone for the next couple of years.

  • Howard Z

    The S4 is inferior to the S3 in one aspect. The S4 is only available with 16GB. There are people waiting for a S4 with 32 or 64 GB. In the meantime they continue to use their S3. How much does this hurt the S4 sales? I don’t know.

    • Festivus Oz

      I completely agree. Waiting on larger memory sizes.
      Would have bought the One with replacable battery and sd card slot.
      Or Xperia Z with better viewing anges and replacable battery.