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Samsung Galaxy

3 reasons why Samsung’s shares have already recovered some ground after Note 7 issue

Source: CNBC:
September 13, 2016 at 13:04
Samsung nominated Jay Y. Lee, the son of current chairman Kun-Hee Lee, to the company's board, thereby setting up a succession plan.

Samsung Electronics shares recovered some ground on Tuesday after more than $14 billion was wiped off the value of the company's stock the day before over the recall of its Note 7 phablet. 

Shares of the South Korean electronics giant closed 4.23 percent higher at 1,527,000 won.

Over the weekend, the company urged Galaxy Note 7 users to switch off and return their devices following reports of batteries in the handsets were catching fire. This sent shares down nearly 7 percent on Monday.

Despite the bounce back, shares are still down over 6 percent since Friday. But investors appear to have shrugged off some of the bad news for three reasons.

No brand impact from Note 7 recall

BNP Paribas reiterated its buy rating for Samsung shares on Tuesday, adding that the stock had a 38.6 percent upside from Monday's close with a target price of 2,030,000 won.

Analyst Peter Yu said in a note that while the recall's cost is likely to be higher than expected, customers don't appear to be leaving Samsung.

"Telcos at least have purchased more Galaxy S7/S7 Edges to replace demand for Note 7s rather than moving to other smartphone vendors. Hence, Samsung has maintained its 3Q16 smartphone shipment guidance despite the expected impact on Note 7 sales," Yu wrote in a note.

"So, if Samsung's customers are not leaving Samsung, its business outlook is not as bleak as the share price correction implies, and we think it will bounce back."

A note by Morgan Stanley also echoes the sentiment suggesting that Galaxy S7 sell-through remains strong. The analysts at the investment bank also noted that no additional reports of Note 7 fires have been reported since Friday, the battery issues are "rare and not complex", and the Note 7 is selling in China and Hong Kong using a different battery supplier.

Slideshow: After Samsung’s Note 7, here’s 10 of the biggest tech recalls ever
Samsung
 

$1 billion sale of printer business

Samsung announced Monday it was selling its printer business to HP for $1.05 billion.

The move has been seen by analysts as positive for helping the company streamline its business and focus on profitable areas such as smartphones and semiconductors.

Succession plans

Samsung nominated Jay Y. Lee, the son of current chairman Kun-Hee Lee, to the company's board, thereby setting up a succession plan.

Kun-Hee Lee was hospitalized in 2014 after a heart attack. The nomination comes as Samsung is dealing with the Note 7 issue and looking forward to new areas of growth such as virtual reality.

"Looking forward, it is charting a path for continued profitable growth through bold and timely investments in core areas and by pursuing new future businesses, which require strategic decisions based on a long-term vision," Samsung said in a press release on Monday.

Analysts see the move as bringing more stability to the top level leadership.

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