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Samsung shares hit seven week low on worries of slowing growth

Samsung shares hit seven-week low on worries of slowing growth

By Reuters | Updated: 7 June 2013 10:05 IST

Shares of Samsung Electronics Co tumbled by more than 4 percent to a seven-week low early on Friday, hit by brokerages' downgrades that have highlighted concerns of slowing growth for its mobile business.

The South Korean firm introduced two stripped-down versions of its flagship Galaxy S4 in recent weeks as it looks to widen its lead with products spanning both the high and cheap-and-cheerful ends of the market.

Its growing shift to cheap models, however, sparked concerns of margin decline and slowing growth momentum for its high-end model the S4.

"Sales of high-end handsets are lagging behind expectations, while low- to mid-end handsets are selling briskly worldwide," said Kim Young-chan, an analyst at Shinhan Investment Corp.

"As the portion of low- to mid-range handsets is expected to increase in Samsung's overall mobile phone business, this has also sparked concerns about thinning margins and lower growth."

Shares of Samsung, worth around $220 billion at its last closing price on Wednesday, fell as much as 4.5 percent in early trade but later pared losses to a drop of 2.8 percent at 1.48 million won.

Global smartphone vendors are trying to expand their offerings to the more popular mid to low end segment to better compete with Chinese manufacturers, which dominate the sector.

The slide in Samsung shares comes after Woori Securities slashed its price target for Samsung by 4.8 percent to 2.0 million won this week, citing weakening profit growth of its mobile business, which generates around 70 percent of Samsung's total profit.

It also cut 2013 and 2014 earnings per share forecasts by 9.2 percent and 11.7 percent respectively.

"It's a general consensus that the profitability of Samsung's mobile business will weaken and it's already largely priced in its share prices," Young Park, a Woori Securities analyst, said in his Wednesday note.

"Should the pace of the profit deterioration stay moderate, it could help stabilize the stock price."

JPMorgan also slashed its earnings estimates and said monthly orders for the S4 have been cut by 20-30 percent to 7-8 million from July due to weak demand in Europe and South Korea.

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