Samsung Halts Note 7 Sales; Apple Could Sell 15 Million More iPhones
Samsung, the world’s No. 1 smartphone vendor by unit sales, told wireless operators to stop sales of the Note 7 phone, which could benefit Apple (AAPL).
Samsung has temporarily halted production of its Galaxy Note 7 smartphone amid reports of overheating and fires occurring in replacement units to recalled handsets.
Samsung said Monday that it is adjusting its production schedule to take further steps to ensure quality and safety of the Galaxy Note 7. After the market close, the South Korean electronics giant told wireless operators to halt sales.
Last month, Samsung initiated a recall of its Galaxy Note 7 smartphone after getting several dozen reports of batteries in the device overheating or catching fire. The recall involves about 2.5 million phones.
On Sunday, AT&T (T), T-Mobile US (TMUS) and Verizon Communications (VZ) said they would stop issuing new Galaxy Note 7 smartphones to replace the ones turned in by U.S. customers until Samsung could work out its problems. Sprint (S) joined the other major carriers in the move on Monday. The carriers are offering refunds or different-model smartphones to Galaxy Note 7 customers.
CFRA Research analyst Angelo Zino on Monday reiterated his strong buy rating on Apple stock, with a price target of 130.
Apple stock rose 1.8% to 116.06 on the stock market today, then edged 0.3% higher in late trading. Intraday, the stock hit a 10-month high of 116.75.
“We see a more favorable competitive landscape and higher Android switcher rates for Apple over the next 12 to 18 months as Samsung’s issues may weigh on future product launches and given Apple’s strong potential offerings,” Zino said.
A 1% gain in global market share for the iPhone would add 14 million to 15 million units, or 7%, to Apple’s fiscal 2017 estimates, Zino said. Apple’s fiscal 2017 started Sept. 25.
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Credit Suisse analyst Kulbinder Garcha on Monday reiterated his outperform rating and price target of 150 on Apple stock. Garcha also believes Apple will benefit from Samsung’s recall woes.
“We believe the Note 7’s ongoing issues could help market share shifts for Apple,” Garcha said. “Given Apple’s existing dominance in (the premium smartphone) market, we would note that any share gain would likely be just incremental. We estimate that every 5% of high-end (smartphone) market share adds around 5-7% to Apple’s EPS.”
The market for smartphones priced above $ 400 is now about 360 million units a year. Apple enjoys about a 55% market share in the segment, vs. 33% for Samsung, Garcha said.
Any market share gains by Apple could be long term because of the stickiness of Apple’s iOS ecosystem, which boasts a roughly 95% loyalty rate, he said.
Apple, Samsung Head To Supreme Court
Meanwhile, the U.S. Supreme Court on Tuesday will hear arguments in the 5-year-old patent dispute between Apple and Samsung over the amount Samsung should pay Apple for copying the iPhone’s distinctive look.
The justices’ ruling could have a major impact on product designers and manufacturers because the Supreme Court, if it agrees with Samsung, could limit the penalties for swiping a patented design, Reuters reported. It will be the Supreme Court’s first case involving design patents in more than 120 years.
Samsung maintains that it shouldn’t have to surrender all of its profits on phones that infringed Apple’s patents, because those patents contributed only marginally to a complex product with thousands of patented features.
At stake is how much of a $ 399 million patent-infringement award Samsung must pay.
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