Samsung Electronics has lost 28 billion dollars of market capitalization in six weeks, and the decline will continue given that Apple and Chinese companies increase their share on the mobile market, considers Adnaan Ahmad, an analyst at Berenberg in London who covered for 16 years technology companies at firms including Merrill Lynch and Morgan Stanley.
Samsung Electronics shares are down 13% since November 29, losing more market capitalization capital than any other company worldwide. Samsung will fall another 11 percent, predicts Ahmad, whose estimates in the last 12 months had the highest accuracy among analyzes tracked by Bloomberg.
The South-Korean company, the largest producer of smartphones in the world, reported for the last three months of 2013 the first decline in profit in the last nine quarters, amid increased competition from Apple and Chinese producers of cheap mobile devices.
According to optimistic estimates, Samsung shares will return to growth after their value has fallen to its lowest level in three years in relation to competitors’ shares. Ahmad believes, however, that investors will continue to sell shares due to lower profit margins of businesses with Samsung mobile phones.
“Selling is totally justified because the market now understands that the margin profile will change drastically. Samsung is in a very precarious position in the next 12 to 18 months,” said Ahmad.
The average price target of Samsung shares fell by about 12 percent since June 2013, and in the last six weeks by 4 percent, according to Bloomberg data. Most analysts do not recommend selling Samsung shares.
According to a Samsung press release on Monday, the group will continue to focus on supply chain management and providing a full range of smartphones with different levels of prices and features. Sales of the Galaxy S4 devices slowed down due to competition from the iPhone 5c and iPhone 5s and Chinese phones with prices starting at $100.
The South Korean company shipped probably around 13 million devices in the fourth quarter, down from 17 million units in the previous quarter, according to estimates published in December 23 by Daewoo Securities.
Samsung faces a new challenge in China, where Apple has signed an agreement last month to sell iPhones through China Mobile, which in late November had 763 million users.
Samsung shares are up 0.7 % on the London Stock Exchange at $620 per unit, giving the company a market capitalization on Tuesday of $182.65 billion.
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