Everyone’s bullish on Samsung, Apple

Apple’s market capitalization is larger than entire sectors, like utilities, leading some observers to call it ‘a sector unto itself.’

Samsung Electronics shares on the Seoul bourse crossed the 1.2 million won ($1,066) mark to reach a record high yesterday.

Half way around the globe, shares in the company’s American archrival, Apple, also hit an all-time high on Tuesday after new reports said it was going to hold a media event March 7 at which it will probably unveil the much-anticipated third-generation iPad.

The upward climb of the shares of the world’s top two global smartphone makers comes amid heightened expectations of a U.S. economic recovery and a bullish run for stock markets in some parts of the world.

Samsung and Apple have been fighting a neck-and-neck battle to gain dominance in the portable device industry.

Samsung sold 3.65 million smartphones in the fourth quarter, compared to Apple’s 3.7 million, according to market researcher Strategy Analytics.

Samsung fell behind Apple in the smartphone war in the fourth quarter, after dethroning its U.S. rival in the third.

But the contest continues and stock punters are watching carefully - and wondering how high the share prices can climb.

Favorable factors

Samsung Electronics’ bull run began last November mainly due to record earnings that resulted from brisk sales of its range of Galaxy smartphones.

On Jan. 3, its shares broke the 1.1. million won mark for the first time, after which they hovered between 1.03 million won and 1.12 million won.

A second boost came on Feb. 15 when the company confirmed to the media that it is considering spinning off its money-losing LCD business unit. That day Samsung shares soared 5.09 percent to a record 1.135 million won.

That was welcome news for investors as the company’s LCD business suffered losses for four straight quarters throughout 2011 amid an industry-wide slump.

Market watchers envisioned a spun-off LCD unit merged with Samsung Mobile Display, the company’s organic light-emitting diode (OLED) display-making unit.

“A potential merger between the spun-off LCD business and Samsung Mobile Display seemed to aim at strengthening competitiveness before competition for OLED TVs heats up,” said Dori Lim, an analyst at Solomon Investment and Securities.

Another upbeat factor emerged this Tuesday, as news surfaced that Samsung’s Japanese rival Elpida Memory filed for bankruptcy protection on Monday. Samsung gained 1.2 percent to close at 1.185 million won that day.

Analysts said Elpida’s move may provide a golden opportunity for Korean chipmakers - Samsung and Hynix - to further increase their presence in the chip-making sector.

With the rival gone, Choi Chang-gyu, an analyst at Woori Investment and Securities, predicts that Samsung shares could even break the 2 million won mark.

“Some people may think that such a prediction is unrealistic, but crossing that mark is not totally impossible given that some analysts are pretty certain it will pass the 1.5 million level,” he said.

New heights

The announcement of the March 7th event has managed to push shares in the California-headquartered Apple to a new high.

“We have something you really have to see. And touch,” Apple said on Tuesday in an invitation, which features a picture of an iPad screen. The new device will sport a high-definition display, run on a faster processor and work with speedier wireless networks, people familiar with the product told U.S. media last month.

With that Apple gained 1.84 percent to close at all time high of $535.41. That pushed its market capitalization to a record $500.1 billion.

The newest iPad will be Apple’s first major hardware release since the death of the company’s legendary co-founder Steve Jobs last October. With new features, Chief Executive Officer Tim Cook hopes to give customers more reasons to stick with the iPad as rivals like Amazon rolled out drastically cheaper alternatives.

Apple now has at least twice the market cap of all but three other U.S.-listed public companies, according to Forbes: ExxonMobil ($410.7 billion), PetroChina ($281.9 billion) and Microsoft ($267.4 billion.)

It adds that Wall Street’s median target for Apple shares is $600, with the highest target on the Street at $700.

Meanwhile, Apple may also unveil an updated Apple TV set-top box at the March event, which could stream higher resolution video to consumers’ televisions, Bloomberg said quoting Gene Munster, an analyst at Piper Jaffray Cos. in the U.S.

Observers including Munster say Apple is planning to release a full television set as early as the last quarter of this year.

Optical illusion

After their bull runs, both Apple and Samsung Electronics now account for a considerable chunk of their respective stock markets.

According to a recent report by JP Morgan hardware analyst Mark Moskowitz, Apple alone accounts for 3.7 percent of the S&P 500 index - a larger percentage than entire sectors such as utilities and telecommunications, leading some observers to call Apple Inc. “a sector unto itself.”

Apple’s sheer mass has developed a “gravitational pull” on the market. According to S&P Indices’ senior index analyst Howard Silverblatt, as quoted by the Wall Street Journal, the broad S&P 500 is currently down 13 percent from October 2007 levels - but the index would be down 15 percent without Apple.

Samsung Electronics has a similar relationship with the Korean stock market.

The benchmark Kospi has been climbing of late - jumping more than 11 percent from the beginning of 2012 to yesterday’s close, after exceeding the 2,000 mark for the first time on Feb. 8 since early August.

Last Friday, the Kospi closed at 2019.89 points, nearly matching the index on Aug. 4 last year when it closed at 2018.47 points.

An analysis by brokerage Samsung Securities found that when Samsung Electronics’ market capitalization is eliminated, the Kospi actually fell between Aug. 4, 2011 and last Friday by 5 percent.

By Kim Hyung-eun, Lee Jung-yoon [hkim@joongang.co.kr]