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Shares in South Korea-based Samsung hit a more-than 21 month
high in mid-March as brokerages raised profit forecasts and
target prices on its improving business outlook. The stock rose
8.6 percent in January-March following a 12.1 percent gain in
the previous period.
Investors believe the Galaxy S6 and its curved-edges variant
will sell briskly when they roll out this month following
positive reviews, and analysts say new mid-tier phones will
boost sales, adding to expectations that the earnings slide in
its handset business is ending.
The recovery is also expected to be backed by strong
semiconductor sales. In addition to healthy memory chip demand,
Samsung's system chips business is seen returning to profit this
year. Its home-grown Exynos processor will power the new Galaxy
phones, and Samsung recently added Nvidia Corp <NVDA.O> as a
contract manufacturing client.
"This is a year of recovery for Samsung," said fund manager Park
Sung-jae at LS Asset Management, which holds Samsung shares.
"The stock price reflects that sentiment."
To be sure, recovery is expected to be gradual and well shy of
record profits in 2013. The median forecast from a Thomson
Reuters I/B/E/S survey of 41 analysts tips first-quarter
operating profit at 5.3 trillion won ($4.82 billion), down 38
percent from 8.5 trillion won a year earlier as mobile earnings
weakened.
The company will release its first-quarter earnings guidance on
Tuesday.
But analysts say the underlying figures should show meaningful
improvements, with momentum to pick up further once the Galaxy
S6 and S6 edge roll out globally. BNP Paribas analyst Peter Yu
expects Samsung to ship 44 million of the new phones this year,
compared with an estimated 38 million units of the disappointing
Galaxy S5 last year.
For the whole year, a Thomson Reuters I/B/E/S survey of 51
analysts expects profits to rise to 26.5 trillion won from 25
trillion won in 2014 - a reversal from the prevailing consensus
early this year for another earnings slide.
"We believe Samsung's smartphone operations are in a full
recovery phase," Yu said in a note to clients last week, adding
that there was an earnings upside of up to $1.5 billion to his
2015 profit forecast of 28.1 trillion won because of the new
flagship devices.
($1 = 1,098.9200 won)
(Editing by Tony Munroe and Stephen Coates)
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