Samsung Has Already Ensured That the IPhone 7 Will Fail

Apple is trading at a very conservative valuation and it may look like a value stock. However, despite the cheap valuation and strong brand value, Apple faces several headwinds going forward that can continue putting downward pressure on the stock. Investors looking to take a bite into Apple should probably wait for the stock to move closer to $90 before buying.

Samsung’s Galaxy S7/S7 Edge is a major problem for Apple

Apple has successfully used its opportunity by launching iPhone 6 series after the iPhone 5 series, but now it looks like iPhone sales have peaked.
Apple iPhone 6/6 Plus was a huge success compared to iPhone 5/5s and iPhone 6S/6S plus. In the most recent quarter, the company’s iPhone sales declined on a y-o-y basis for the first time since 2007. It clearly gives the idea that Apple's dependency on just a single product will create many problems in the imminent years.

Apple sold 51 million units throughout the quarter, a decline of 10 million units compared to 61 million units in the second quarter previous year. The drop was worse on a sequential basis, declining by 32 percent equated to the prior quarter. Moreover, the company’s global smartphone market share declined to just 14.8 percent in the first quarter from 22.5 percent in the first quarter of 2012.

Apple and Samsung are the leading giants in the smartphone industry. However, I believe that Samsung has beaten Apple on many fronts this year. Apple’s real competitor has always been Samsung’s Galaxy series. There were many flaws in the Galaxy S6/S6 Edge such as an absence of a micro SD slot and a lack of efficient waterproofing, which helped Apple sell more iPhones last year.

However, recently Samsung released its new flagship smartphone Galaxy S7/S7 Edge, which include all the features that were absent in Galaxy S6/S6 Edge. Galaxy S7 series can support up to 200 GB expandable storage and is effectively water resistant with a total of 4 GB RAM.

I believe it was Samsung’s strategy to first introduce a sleek and amazing glass metal design smartphone(Galaxy S6/S6 Edge) with fewer features that can attract consumers, and then introduce a new device (Galaxy S7/S7 Edge) that includes all the feature that were absent in its predecessor. If so, Samsung’s strategy has played well as the Samsung Galaxy S7/S7 Edge is outperforming in the smartphone market.

With the smartphone market shrinking, Samsung has taken a massive lead in the flagship phone department. As a result, Apple has fewer customers to target with its iPhone 7. The hardcore iPhone fans will rush in to buy the iPhone 7 as soon as it is launched, but Apple’s overall sales will likely decline due to Samsung’s homerun.
Published on Jun 3, 2016
By Prudent Investor

Copyrighted 2016. Content published with author's permission.

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