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Samsung may have a habit of copying Apple (NASDAQ: AAPL ) , but the one thing the South Korean conglomerate certainly doesn't want to imitate is Apple's well-documented pullback from its all-time highs last year. After tapping $705 in September, the Mac maker traded as low as $385 in April. That's a 45% drop over eight months.
The main factors driving Apple's pullback have been investor fears over saturation in the high-end smartphone market, downward pressure on pricing and gross margins, and the lack of any new product categories. Along the way, analysts have been dropping estimates, since it's become increasingly hard for Apple to deliver growth considering the large base it's now at.
Samsung looks like it may be in store for a similar fate, and for a lot of the same reasons. This month, Samsung has shed a whopping 13% of its value.
June hasn't been kind to the company, as analysts have begun to reduce estimates on Samsung's smartphone units. JPMorgan Chase started off the month by cutting estimates, saying Galaxy S4 orders had fallen by 20% to 30% to 7 million to 8 million because of soft demand.
Thanks to an enormous marketing budget, Samsung had successfully built an incredible amount of hype leading into the launch of the Galaxy S4. Those aggressive marketing campaigns, most of which were at Apple's expense, didn't just inflate consumer expectations of what turned out to be a modest upgrade -- analysts were also expecting a lot from all the hype.
Samsung's mobile business has quickly grown to become its biggest generator of operating income -- 74% of consolidated operating profit came from the mobile segment in the first quarter. Apple doesn't break out operating profit by product, but 53% of last quarter's revenue came from the iPhone. Needless to say, both companies are heavily concentrated on the smartphone market, and the secular trends taking place there are weighing on them both.
Where the two companies differ is that Samsung currently plays in the low-end and mid-range market segments that are showing the most growth, particularly in emerging markets. Those segments also carry lower margins relative to the high end. Apple has yet to enter the mid-range, as even the older iPhone 4 is priced near the high end of those markets.
About a month into Apple's pullback, shares were down 13%. With Samsung's own pullback just beginning with almost identical performance, will it end up copying Apple again?