Samsung Posts Record Q1 But Adds Cautious Voice To Smartphone Demand Forecasts

Samsung Electronics (SSNLF) , the world's biggest smartphone and chipmaker, cautioned investors that weaker global demand would likely result in "stagnant" sales of its flaghship models even as it posted record first quarter profits. 

Samsung said operating profit for the three months ending in March came in at a record 15.6 trillion won ($14.4 billion), topping analysts' forecasts and rising 58% from the same period last year. Around 24% of that total -- 3.77 trillion -- was pegged to the group's mobile division, thanks in part to surging sales of its Galaxy S9 handset. Overall group sales rose 20%, Samsung said, to 60.6 trillion for the three month period.

However, Samsung cautioned that "generating overall earnings growth across the company will be a challenge due to weakness in the display panel segment and a decline in profitability in the mobile business amid rising competition in the high-end segment." It also said warned of "stagnant sales of flagship models amid weak demand and an increase in marketing expenses".

Samsung shares gained 3.41% in Seoul Thursday to close at 2.606 trillion won each, a move that edges the stock into positive territory for the year. 

The smartphone demand concern, however, puts Samsung in-line with regional rival SK Hynix (HXSCL) , which cautioned investors earlier this week that second quarter sales would slow thanks to a slowdown in smartphone shipments.

That warning echoed similar concerns last week from rival Taiwan Semiconductor Manufacturing Company Limited, which has fallen more than 10% over the past week after it guided investors to a softer-than-expected second quarter top line owing to "weak demand from our mobile sector".

The collective concern has investors wondering how Apple will respond, both in its fiscal first quarter earnings, which are due on May 1, and its plans for iPhone X price changes amid increasing speculation that shipments have fallen short of expectations thanks to its $999 cost.

The world's biggest tech company, which is responsible for 4% of total S&P 500 earnings and more than a fifth of the U.S. information technology sector, is is expected to report earnings of $2.69 a share for the three months ending in March, its fiscal second quarter, according to the median FactSet estimate, a 28% increase from the same period last year but notably less than the $3.89 it earned in the final months of 2017.

Action Alerts PLUS holding Apple shares rose 0.44% in New York Wednesday to close at 163.65 each a move that trimmed the stock's year-to-date decline to 3.3% compared to a 9.4% gain for the NYSE FANG+ Index, an equal weight benchmark which tracks the moves of ten of the biggest and most active tech stocks in the world.