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How Major Smartphone Releases Impact Their Parent Company's Stock

Related: CNB Business News

 

For gamers, Pokémon Go is a drain on their smartphone batteries, as players spend more time locating, capturing, battling and training the game's virtual creatures. But for battery case manufacturer Zagg, the game’s popularity has been a boon to the company's stock, CNN reports.

Following PC Magazine’s mention of Zagg in recommendations for Pokémon Go backup batteries and battery cases, the company’s stock soared 25 percent in one week this July. Similarly, smartphone companies see their stocks rise and fall with the release of new products. Here’s a look at how some major smartphone releases have affected their parent company's stock fortunes.

Apple iPhone 7

Historically, Apple stock has fallen 80 percent on the day of a product unveiling, only to rise 70 percent the day after the event, according to Kensho data. Apple shares have fallen only three times in the six months following a major iPhone launch.

So far, the release of the iPhone 7 and iPhone 7 Plus is bucking historic trends. For this launch, Apple stock rose 0.45 percent the day prior to the release, but fell 2.67 percent the next day. This is unusual, but not unprecedented. When the iPhone 5S and multi-colored 5C launched in 2013, Apple stock fell 5.44 percent the day after the release announcement, based on the perception that although the 5C was being marketed as an inexpensive alternative to the 5S, it was priced too high. But within six months, stocks had rebounded by 7.34 percent. It remains to be seen how the iPhone 7 launch will fare over the long term.

The short-term drop may be due to a Wells Fargo downgrade of Apple stock from “buy” to “hold,” based on the perception that the new phone’s positives are still unknown and triggered by Apple’s announcement that it would discontinue its precedent of releasing first-weekend sales figures. Analysts also speculate that experts may be looking past the iPhone 7 to the release of the iPhone 8 in the fourth quarter of 2017, anticipating that stocks will rise 17 percent over the next 12 months.

Samsung Galaxy S7 and Note 7

Meantime, Samsung’s launch of the Galaxy S7 series this spring captured some of Apple’s market share and, in the process, increased Samsung’s stock, Investors.com reported. Samsung’s share of smartphone industry profits improved 31 percent in the second quarter, up from 22 percent in the first quarter, while Apple’s share of smartphone profits fell from 84 percent to 75 percent over the same period. Surveys indicated the S7 was meeting consumer demand during the wait for the iPhone 7. Consequently, Apple stock was posting losses in mid-August, while Samsung stock was up 30 percent this year heading into the end of August.

But as September started, Apple got an unexpected gain from an announcement that Samsung was recalling the Galaxy Note 7 due to battery overheating issues. Almost overnight, Samsung’s market value fell $10 billion, with shares down 3.9 percent in South Korea. For most companies, this would be crippling, but The Wall Street Journal doesn't see it affecting Samsung’s long-term reputation or growth. In fact, Samsung’s swift recall in response to the crisis, providing customers the option of switching battery suppliers, and the company’s long-term research and development innovations should serve to mitigate the short-term loss.

Huawei Honor 8

In Asia, and increasingly elsewhere, Samsung and Apple face significant competition from Chinese rival Huawei, which is now the third-largest smartphone producer in the world. In China, Huawei enjoys a significant price advantage over foreign competitors. This, coupled with the fact that Apple’s latest iPhone releases haven’t been as revolutionary as previous versions or as recent competitor upgrades, has caused Apple to lose ground to Huawei in China.

In the second quarter of 2016, Huawei's market share rose 15.2 percent from last year to capture 17.2 percent of the Chinese smartphone market, while Apple dropped 31.7 percent in China and is also falling worldwide. Now, Huawei is looking to penetrate the American smartphone market by meeting the iPhone 7 with the launch of the Honor 8, which resembles the Galaxy S7 and has a budget price of $399.99. As the iPhone 7 hits the market, Huawei stock has been holding steady through the beginning of September, up 0.14 percent as of September 9. How much ground it can gain on its competitors in the U.S. remains to be seen.

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