Image source: Samsung.
It looks like it's the end of the line for Samsung's (NASDAQOTH: SSNLF) ill-fated Galaxy Note7. The mobile giant is halting production of the device after a few flame-bursting handsets resulted in a recall. Samsung is now asking wireless carriers and retail partners to cease sales and exchanges, opening the door for rival handset makers.
Apple (AAPL +2.08%) is being played up as a huge beneficiary here. The stock is shooting higher, and a couple of Wall Street pros see the class act of Cupertino scoring millions of incremental iPhone sales in light of the calamity at Samsung.
Drexel Hamilton analyst Brian White feels that Apple stands to score at least 8 million more iPhone units this quarter. That would be more than half of the 10 million to 14 million Galaxy Note7 handsets that White was expecting Samsung to ship this year, though Credit Suisse feels that this will cost Samsung to miss out on 19 million units.
S&P analyst Angelo Zino is even more aggressive. He sees Apple picking up 14 million to 15 million iPhone sales as a result of the Note7 fiasco. This would translate into Android relinquishing 1% of the market share to Apple's proprietary iOS, based on the roughly 1.5 billion smartphones that industry trackers expect to ship this year.
Another bite of the Apple
Things obviously bode well for Apple in this scenario, and the stock has been shooting higher as Samsung stock takes a hit. Apple stock hit a 10-month high today on the news. However, it's also important to have realistic expectations here. Apple is going to benefit from the blazing death of the Galaxy Note7, but let's not get too ahead of ourselves here.
Samsung is going to have a hard time getting back on track. This is just one of the many devices in its wide product line, but the Samsung and Galaxy brands are going to get tarnished. That's clearly good for Apple, but it's probably even better for many other makers of Android devices.
Android remains the mobile operating system of choice, commanding 87.6% of the market during the second quarter according to industry researcher IDC. It's far easier and cheaper to replace an Android device with a rival Android smartphone. If someone deliberately chose Android over iOS in singling out the Note7, it's a fair bet that those reasons are still in play.
We also get to the unfortunate timing of the event. Apple just rolled out the iPhone 7 last month, but there's an inventory shortage of the larger iPhone 7 Plus models. That's going to be a problem. Buyers of the Galaxy Note7 were likely drawn to the 5.7-inch display. This would make the iPhone 7 Plus and its 5.5-inch display a clearer replacement choice than the iPhone 7 with its 4.7-inch display.
Unfortunately for Apple and iPhone 7 Plus seekers, new orders for Apple's largest (and priciest) smartphone won't be filled for another three to four weeks. If you own a Note7, are you really going to risk a fire or go without a smartphone for nearly a month? If you bought the gargantuan-sized Note7, you will probably move to a bigger Android device before opting for the relatively puny iPhone 7.
Apple is going to make out like a bandit here, but it may not be as big a winner as bulls and some Wall Street pros expect it to be. It's great to see Apple stock surging back into market fancy in recent months, but we've seen what unrealistic expectations have done to the stock when things don't play out just right.
