This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Is Samsung Still a Growth Company?

NEW YORK (TheStreet) -- Samsung Electronics' (SSNLF) forecast on Tuesday highlights the company's growing need for a new standout product in what is becoming a saturated smartphone market.

South Korea's largest company by market capitalization said it is on track to post a lower profit for the second straight quarter, mainly because of contracting margins in its smartphone business, which is under pressure from Apple (AAPL) and cheaper Chinese rivals.

Samsung is releasing the fifth version of its flagship Galaxy S smartphone worldwide on Friday. The phone has already been released in South Korea with a weak showing as critics say the product lacks flashy new features and fails to differentiate itself with existing Samsung Galaxy models.

Meanwhile, both Apple and Samsung are facing issues with the costs of their phones. Both companies have tailored their products to high-end consumers, pricing themselves out of range of poorer consumers in emerging markets and opening the door for smaller Chinese smartphone makers to capture market share.

China's Huawei Technologies has flooded emerging markets with low-priced smartphones. Last week, it reported 34% profit growth for 2013 as it became the world's third-biggest smartphone maker and said that it is aiming to double its revenue over the next five years.

Samsung now braces for what could be its first annual profit decline in three years, leading investors to question if the company's stellar growth will ever return.

The company's stock is down almost 12% from its record high hit in January last year, which has put pressure on the company to use its cash holdings to improve the share price.

Samsung plans to raise its dividend payouts, and with $52 billion in cash, the company has room to make more moves such as share buybacks. Some observers, however, say that Samsung's move to artificially increase its share price is acknowledging that the company's best days are behind it.

A technology company's most important goal is growth. Higher dividends compensate investors for a lack of growth. Therefore, Samsung may invest more to improve its products rather than concede market share in the increasingly competitive smartphone market.

SSNLF data by YCharts

At the time of publication, the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 -1.15%
FB $117.58 0.73%
GOOG $693.01 0.29%
TSLA $240.76 -2.81%
YHOO $36.60 0.03%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs