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Samsung stock rises on signs of a turnaround

Samsung said on Wednesday its operating profits likely fell 34% in the fourth quarter. But the forecast beat analysts’ estimates, signaling a turnaround for the company in the coming year helped by higher prices for memory chips and strong sales of its smartphones.

Shares in Samsung rose nearly 2.9% in Seoul.

The South Korean technology giant said that it expects to make an operating profit of 7.1 trillion Korean won ($6 billion) for the quarter that ended in December. That’s down from 10.8 trillion Korean won ($9.2 billion) for the same period a year ago, but higher than analysts’ estimates of 6.6 trillion won, according to data provider Refinitiv.

The company said it expects sales to fall 4.4% to 59 trillion won ($50 billion).

Samsung’s profits have taken a beating over the past year, largely because of a slump in its memory chip business.

But analysts have been saying for months now that they expect memory chip prices to rise in 2020 as a glut in the market comes to an end, leading to “normalized inventory levels and a demand recovery,” SK Kim, an analyst at brokerage firm Daiwa Capital Markets, said in a note last week.

Samsung’s expensive 5G smartphones have also been really popular. The company said last week that it sold 6.7 million 5G smartphones in 2019 and now accounts for more than half the global market. Shipments exceeded expectations — the company had set a sales target for the year of around 4 million.

A faster-than-expected rollout of 5G will be “a major demand catalyst” for the memory chips and other components Samsung makes for its smartphones as well as other device makers, HSBC analyst Ricky Seo wrote in a note on Monday.

Samsung has first mover advantage when it comes to smartphones that run on the new high-speed networks, beating its rivals to the punch when it rolled out the Galaxy S10 5G for Verizon customers in the United States in May last year.

Apple is not expected to have a 5G-enabled smartphone until the end of 2020.

Huawei launched its first 5G phone last year, but sales in international markets remain handicapped by a US ban on Huawei.

Washington added Huawei, the world’s largest telecommunications equipment maker and No. 2 smartphone seller, to a trade blacklist in May, barring US companies from selling vital tech and components to the Chinese tech giant.

The US ban forced Huawei to launch its latest flagship phone, the Mate 30, without key Google services. Without access to popular apps like Google Maps and YouTube, Huawei phones become a lot less attractive to international users.

Research firm IDC said in November that Samsung has been gaining marketshare worldwide, pushing its cheaper smartphones to fill the gaps left behind by Huawei.

“Samsung benefited the most internationally from Huawei’s woes, ramping up the more affordable A series,” IDC analyst Melissa Chau said at the time.

Samsung is expected to report full earnings at the end of the month.

CNN

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