Samsung (XKRX:005530) has managed to regain its mojo in the smartphone market by launching the highly successful Galaxy S7. The success of its flagship device is evident in Samsung’s results.
Over the past few years, Samsung has performed very well, mainly due to its Galaxy S series. In the most recent quarter, the company’s net income surged 1.7% to $5.2 billion from a year ago period, whereas its operating profit escalated 18% to $8 billion.
Samsung recently launched its new flagship Galaxy S7 smartphones. Galaxy S7 and S7 Edge have become the world’s best smartphones. The company also detailed that the robust sales of its latest Galaxy S7 smartphones impelled it to report its most profitable quarter in the prior two years.
Moreover, the company also projects robust earnings to endure in the second half of 2016 and is on its way to introduce its new Galaxy Note 7. The launch of Galaxy Note 7 is scheduled before the launch of Apple’s new iPhone 7. Note 7 will be powered by Qualcomm’s Snapdragon 820 processor. Most significantly, Note 7 will have some new features, comprising GIF making capacities as well as tap magnification (S-Pen stylus features).
All in all, Note 7 seems like a smartphone monster as well as another great iteration of the company’s successful smartphone line up.
Virtual Reality
Samsung is an official sponsor for the Rio Olympics and this is the primary reason behind the company’s virtual reality win for the Olympics. Therefore, the company used this partnership to gain benefits in the VR market. Furthermore, the company’s VR headset is available in the market for just $99, compared to the $600 Oculus Rift.
This is because Samsung’s VR headsets are powered by its smartphones, whereas, Oculus Rift needs PCs powered with high-end graphics cards. However, this definitely makes it less of an actual VR experience, but considering that virtual reality is at its infant stage, it almost certainly does not matter much to consumers. A lower entry point is what consumers care about right now, which is why Samsung’s foray will be highly beneficial.
Conclusion
The fact that Samsung’s smartphone sales have grown considerably in a flat sales environment shows that the company will continue witnessing strong sales. Moreover, as mentioned above, the company’s foray into the virtual reality market is expected to be a successful one as well. Thus, I think Samsung is a good stock to have in your portfolio at this point in time.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
Start a free 7-day trial of Premium Membership to GuruFocus.
