Apple Is A Buy Ahead Of IPhone6 Launch

  • Samsung will time a release in-line with iPhone 6 launch window.
  • It’s unlikely the Samsung Galaxy S5 Prime will be as successful as the iPhone 6.
  • Furthermore, Apple’s gain in high-end consumers may impact Samsung’s product mix enough to lower net profitability in Samsung’s 2015 fiscal year.

Rumors of a Samsung Galaxy S 5 Prime have emerged, which will directly compete with the Apple (NASDAQ:AAPL) iPhone 6 launch. The iPhone 6 will be indicative of whether or not Apple can sustain growth rates for its most successful product category. Furthermore, the Samsung Galaxy S5 Prime launch in September is highly likely as it matches the Q3-Q4 launch of Qualcomm’s Snapdragon 805.

Historically, Samsung has avoided launching the Galaxy side-by-side Apple’s iPhone. But this time around, a 6-month launch cycle is highly probable, as Samsung’s Galaxy S5 isn’t running on next-generation components.

Component comparison

The Galaxy S5 Prime upgrades consists of metal casing, higher resolution display, along with a better processor and graphics.

According to Phone Arena:

Galaxy F packing a 5.3-inch, QHD (1440 x 2560 pixels) display, a Qualcomm Snapdragon 805 quad-core chip, 3GB of RAM, and a 16-megapixel shooter with Optical Image Stabilization. The serial leakster also suggests that Samsung will make the Galaxy F official sometime in September. Plenty of time 'till then, so we'll have to sit tight for now.

Admittedly, Samsung’s smartphone will come equipped with a really faster processor, and graphics. However, real world performance wise, the iPhone is likely to be comparable, as the operating system is optimized to use Apple’s in-house semiconductor solution.

Furthermore, rumors indicate that the Apple iPhone 6 will come with NFC wireless charging. Not having to plug an iPhone into a wall is an added convenience that Samsung may not be able to address over the short timeframe leading up to a September launch. Furthermore, Samsung still doesn’t know what the iWatch will be capable of. Therefore, Samsung’s competitive environment could make for a downside catalyst over the second half of 2014.

Samsung is releasing a me-too phone to prevent Apple from gaining even more market share. However, as indicated by WWDC, Apple has been able to build upon its product ecosystem by offering unique services that Samsung can’t quite match. Samsung wants to address this through the release of the Tizen OS, but unfortunately the Tizen OS offers a mediocre collection of applications.

Currently, iPhone 6 is entering into mass production, so preliminary photos have surfaced at Macfixit. The device is thinner than the iPhone 5S, and looks somewhat similar to it as well. The iPhone 6 will come with the A8 processor, along with a 4.7 inch and 5.5 inch variation. I’m willing to assume that the smaller screen iPhone will be the lower-end model, but components will be almost identical.

Therefore, Samsung may have trouble winning any Apple brand loyalist. In fact, Tim Cook mentioned some key statistical data during the keynote at WWDC (the transcript is extremely choppy):

Customer satisfaction ratings "no one gets."  97% overall satisfaction for iOS 7. iOS 7 took the iOS experience to a higher level. "And then sought a better experience and a better life and decided to check out iPhone and iOS." "They had bought an Android phone... by mistake." Many were switchers from Android. 130m totally new customers in the last year on iOS devices. "This is incredible."

Apple gained 130 million customers, and many of them were Android users. Apple’s market share primarily came from the high-end. Following the launch of the iPhone 6, Apple will convert more Android users into Apple fans. Therefore, Samsung may be in more trouble than what’s alluded to by just the numbers. Higher-end devices are where the high gross margins are at. If sales from higher gross margin smartphones (Galaxy S5 Prime, Galaxy Note 4) decline year-over-year, Samsung’s profitability may worsen well ahead of expectations.

Galaxy S5 sales did grow year-over-year as Samsung has claimed to have sold 11 million units within the first month of its launch. But I wonder if Samsung will be able to recreate that kind of success on a 6-month launch cycle? You see, I’m not convinced Samsung’s brand loyalists will jump from a Galaxy S5 to the S5 Prime. Furthermore, I expect Apple to continue converting Samsung owners due to having a bigger screen and better software/ecosystem.


The Galaxy S5 Prime does little to deter Apple’s iPhone 6 launch. It’s likely that Samsung will lose market share in high-end devices, which will have a drastically negative impact on profit margins. Furthermore, Apple should be able to beat analyst expectations as consumers are expected to purchase an updated iPhone on the basis of a bigger screen.

Investors should have a buy-and-hold mentality for the duration of 2014 as Apple is a buy ahead of the iPhone6 launch. There’s very little Samsung can do to gain Apple brand loyalists.

To see Apple’s latest stock price movement, click here (NASDAQ:AAPL)

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