Samsung Stock and Reputation Will Recover in 2017 with New Phone Release
The Samsung Electronics Co. Ltd. (NASDAQ:SSNLF) brand has gained iconic status worldwide because of its mobile phones. It’s not surprising, therefore, that Samsung stock has taken a big hit after the company ceased all “Galaxy Note 7” sales and asked owners to send theirs back. The phones’ batteries are prone to catching fire. Not only has this phenomenon changed the meaning of the “your ears are burning” catchphrase, it has embarrassed the company.
But the most surprising thing about Samsung stock is that it hasn’t crashed. It hasn’t dropped anywhere near as low as the company’s reputation has. As security officers at airports worldwide could start banning passengers from carrying a Galaxy Note 7, as if it were a pistol or some over-100 ml bottle of liquid, Samsung shares remain well within their all-time high.
It’s true that since last September, SSNLF stock has lost some seven-to-eight percent, but the loss came after the biggest rally in Samsung’s history, remaining about 30% higher than a year ago. On October 17, investors were feeling bullish about the company in Seoul, Korea. Samsung shares closed up—even if by only half a percentage point—on the day when Japanese air transport officials formally banned the Galaxy Note 7 altogether.
Samsung Did Good by Pulling the Note 7
There wasn’t much Samsung could do. It did the most responsible thing by recalling all Galaxy Note 7 devices, which allows the company to better manage its reputation. Indeed, the big question is: will Samsung recover its reputation? A good reputation is key to any electronics brand’s success. There have been enough Samsung smartphone fans to uphold Samsung’s value, but the company must do something to improve its image soon in order to sustain it and win back more customers.
The good news for Samsung users and investors is that the question is not if Samsung can recover its reputation, but when. As we know, the Galaxy Note 7 smartphone has a manufacturing defect that has caused dozens of fires and explosions. That problem worsened when, even the handset replacements—delivered by Samsung—did not reduce the number of calls to firefighters worldwide. Samsung then stopped manufacturing the Galaxy Note 7 altogether.
As for Samsung, it has lost about $ 3.0 billion. But, by the course of SSNLF stock, it seems that both the stock and the company will do well. Samsung will work to fix the problem and re-issue the new Galaxy Note 7. If it does so before Christmas, it can take advantage of the biggest shopping season of the year to relaunch its brand with a mega-promotion, repairing its image and putting some welcome heat under the stock (instead of into your ear).
Even Apple Inc. (NASDAQ:AAPL), the company that most stands to benefit from the Samsung debacle, might already have stopped its gains. There is a simple reason. Samsung “Galaxy” users prefer the “Android” operating system and, if they are going to switch, it will be in favor of another Android phone. If anything, they might consider phones by HTC Corporation or the new “Pixel” phones by Alphabet Inc. (NASDAQ:GOOG), otherwise known as Google.
A recent poll revealed that 40% of consumers said they would not buy a Samsung smartphone. In late September, the figure was 34%. Some eight percent of respondents say they want to adopt a Google Pixel, 30% want to migrate to an “iPhone,” and 62% intend to stay on Android but choose another brand. (Source: “As 40% of current Samsung customers won’t buy another phone from them, Google’s Pixel will benefit, survey says,” 9to5 Google, October 13, 2016.)
Samsung Stock Could Hit a New Record High in 2017
Samsung fans can still buy the company’s “Galaxy S7 Edge” or wait for the “Galaxy S8,” which was scheduled to come out in early 2017. You can bet that engineers are working around the clock to get it out sooner. As for the company’s reputation, Samsung is paying a high price, but some 46 million phones have been recalled by all manufacturers because of their pyromaniac tendencies. Apple phones have also caught fire.
The problem is the lithium battery. They tend to catch fire when they heat up. Today’s trend toward bigger screens puts more stress on devices, generating more heat. Samsung can use this to its advantage, however. The company has suffered a reputation loss, but it will use this occasion to deliver an altogether-better device, probably one that is more efficient.
It can do this because Samsung is one of the leading processor companies in the world. Quietly, while the world has a laugh at its expense, Samsung has started to mass produce the next generation of processors to be featured in the “Snapdragon 830,” Qualcomm, Inc.’s (NASDAQ:QCOM) next flagship processor. This will power the Galaxy S8, as well as different phones from other Android manufacturers. The processors simply offer better performance with better battery life. (Source: “Samsung Starts Production on 10nm Processors, Possibly for the Snapdragon 830,” Droidlife, October 17, 2016.)
This is the best possible news for Samsung stock for 2017. Semiconductor manufacturing is crucial for Samsung. Processors will save Samsung’s financial results after the failure of the Galaxy Note 7. The new processors will ensure that the Galaxy S8 will succeed with the less battery strain/higher performance formula, bringing buyers back and sending Samsung stock to a new high in 2017.