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Samsung Q1 Profit Prediction Beats Market Estimate amid Coronavirus Pandemic

UTC by Tolu Ajiboye · 3 min read
Samsung Q1 Profit Prediction Beats Market Estimate amid Coronavirus Pandemic
Photo: Depositphotos

Despite serious market problems that stem from the coronavirus outbreak, Samsung predicts a good profit from its first-quarter figures.

Because of the coronavirus pandemic, many companies have significantly cut down their expectations for the first quarter of 2020. The pandemic and the resultant lockdown of many cities in many parts of the world, has affected the regular flow of business. This means that these companies cannot perform at their optimum level if they were doing so before. Regardless of these obvious problems, Samsung is optimistic about its profit for the quarter.

Samsung Expects Good Q1 Profit

In an official news release, Samsung recently said that it predicts good numbers for its operating profit in Q1 2020. The South Korean tech giant expects its figures to do better than previous figures from 2019 and also market estimates. For specifics, the company says that its operating profit will hit 6.4 trillion Korean won, roughly $5.23 billion. This represents an increase of 2.7% from last year’s 6.23 trillion won in the first quarter.

Samsung says its consolidated sales for Q1 should climb 5% over last year’s figure to 55 trillion won, over $45.4 billion. Refinitiv had estimated 6.2 trillion won, about $5.05 billion, for the company’s operating profit. Samsung Electronics stock has now climbed 1.85%.

With this outlook, Samsung is now one of a small number of companies that are positive about Q1 figures.

Samsung Could Brace Coronavirus for Profit

Samsung, just like many other companies, is feeling serious effects of the coronavirus pandemic. Several of its stores and factories in different parts of the world have been closed as governments enforce lockdowns to curb the spread. Because of this, sales will definitely be affected. However, other factors could play in Samsung’s favor.

Speaking on CNBC’s Squawk Box, Daiwa Securities executive director SK Kim, pointed out a few factors. According to him, Samsung is doing a lot to keep costs as low as possible. Coupled with this, the company’s memory chips are still in high demand especially from data centers that need to accommodate higher demand. These two factors, in addition to the falling Korean won, might be strong enough to do wonders for Samsung. Kim believes this will help shore up performance in other categories:

“This will continue to drive memory price high in the second quarter, which will offset weakness on the mobile as well as the TV [departments].”

According to Sanjeev Rana, CLSA Senior Analyst, Samsung does most of its smartphone manufacturing in South Korea, India, and Vietnam. Based on this, especially because not a lot of manufacturing is done in China, Rana feels confident about the company’s second-quarter figures. However, he believes that smartphone shipment all over the world for 2020, might fall to 8% and Samsung could be affected as well.

Delays in 3nm Production

The coronavirus pandemic is, however, affecting Samsung with regards to producing its 3nm chips. Samsung is basically competing with TSMC in a race to 3nm production. The company initially revealed plans to begin mass production sometime in 2021. However, with the current situation, the company might be unable to begin production anytime earlier than 2022.

Already, NAND flash prices in China are doing poorly because even though the market is waking up, demand is poor.

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