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Samsung Electronic’s first quarter profit likely to fall 60%

Samsung Electronic has warned its first-quarter operating profit could slide 60% from a year earlier, missing estimates.

The smartphone and memory chips maker warned that the first-quarter would likely be disappointing due to falls in chip prices and slowing demand.

Samsung said January-March profit was likely 6.2 trillion won ($5.5 billion), below the 6.8 trillion won estimate from analysts according to Refinitiv SmartEstimate.

The company also said revenue also likely fell 14% from a year earlier to 52 trillion won.

The firm will disclose detailed earnings in late April.

Samsung share price

Samsung shares rose briefly before trading flat following the guidance announcement. Meanwhile, the broader market was up 0.2% at the time of writing.

Investors will have their eyes peeled for positive improvements in chip prices in Q2, hoping for better results.

Samsung shares dipped 0.11 in Friday morning trade. Analysts say the relatively neutral reaction in the stock market was likely because investors already had expectations that the profit would drop in the first quarter, following on from the company's warnings.

Galaxy S10 in high demand

Analysts also say some models from Samsung's premium Galaxy smartphones are also struggling to be profitable due to the rising costs of innovation. It is also observed by analysts that fierce competition from Chinese rivals and the lack of consumer upgrades have also played a part in lack of demand.

However, there have been bigger and better than expected demand for Samsung's flagship device, the Galaxy S10. The long-awaited phone was released to retailers on March 8 this year, with pre-orders coming in at some of the highest in the company had seen, according to Samsung.

Analysts predict the Galaxy S10 phone could reach 38 million shipments in this year alone.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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