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Samsung Projects ‘Better than Feared’ Earnings Guidance for 2022 Q2 Despite Weak Consumers’ Demand

Electronics company Samsung reported a better-than-feared 2022 Q2 earnings guidance on the 7th, triggering a rally in the company’s shares. As Samsung posted impressive numbers for its Q2 2022 performance, Asian chipmakers also jumped. Samsung posted its earnings guidance for 2022 Q2 amid inflation and pressure on chip stocks. There have been disruptions in the supply chain and increasing inflation that is reducing consumers’ demand. Also, the figures came as a relief to investors who are concerned with the rising inflation, increased costs for semiconductor firms, and reduced consumer demand.

This year has seen more downs than ups, especially with the Russian invasion of Ukraine. Semiconductor firms have been experiencing difficulties as chip stocks decline due to supply chain disruptions. The rampant inflation and rise in material costs also weakened demand for products such as smartphones. Semiconductor manufacturing company Micron Technology (NASDAQ: MU) warned against a drastically low demand for smartphones for the rest of the year. The memory chips vendor for PCs and smartphones said customers’ requests for smartphones would be lower than previously expected. The company’s CEO, Sanjay Mehrotra, predicted that smartphone unit volume to drop 5% YoY. More so, management consulting firm Gartner (NYSE: IT) also updated its prediction on the fall of global mobile phone sales. The company had earlier predicted sales to grow 2.2%. However, Gartner recently revisited its expectation and now expects global mobile phone sales to plunge 7.1% this year.

Samsung Posts ‘Better Than Feared’ Earnings Guidance for 2022 Q2

The demand weakness and challenges facing semiconductor firms set the pace for the Samsung 2022 Q2 earnings guidance. The electronics company expects revenue in the quarter to grow 22% YoY to 77.78 trillion Korean won, equaling $59.8 billion. Additionally, the company is looking forward to a 12% increase to 14.12 trillion Korean won in its operating profit. However, the figure represents its slowest gain in over two years.

Market experts had expected Samsung to project lower numbers for the new quarter. Daiwa Capital Markets, SK Kim, told CNBC’s “Street Signs Asia” that the results were still “better than feared.”

In reaction to Samsungs’s projection, the company’s shares added over 3% on Thursday. Similarly, other semiconductor stocks in Asia also pumped on the same day. United Microelectronics Corporation advanced over 7%, while South Korea’s SK Hynix grew by almost 2%. Taiwan Semiconductor Manufacturing was also up 5%. Since the year started, Samsung has lost 25%.

According to the research director at Counterpoint Research. Dale Gai, the increases are “relief of the fears before the results, as investors have oversold tech stocks.” CLSA analysts Sanjeev Rana also noted:

“(A) lot of the bad news is also in the price and for stocks like Samsung and Hynix the investors seem to be betting that the two companies might also announce memory production or capex cuts just a Micron announced last week.”

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Samsung Projects ‘Better than Feared’ Earnings Guidance for 2022 Q2 Despite Weak Consumers’ Demand