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After several quarters of battling it out for the top position in the smartphone market, it seems Samsung (OTC:SSNLF) has pulled ahead of Apple (NASDAQ:AAPL) with a second consecutive quarter of strong smartphone sales. Strategy Analytics revealed in a recent report that Samsung managed to ship more than 50 million smartphones in Q2 2012, almost twice as many as Apple during the same period. This followed the 44.5 million smartphones that Samsung shipped in the previous quarter, also ahead of Apple’s 35 million iPhone shipments during the quarter.

The past year has seen Samsung gain a lot of smartphone market share. Its market share has doubled to more than 36% in Q2 2011 from about 18% during the same period last year. We believe that a major part of the company’s success can be attributed to its much larger portfolio of smartphones that address more market segments than the iPhone does. However, Samsung’s huge lead over Apple in the latest quarter also points to the company’s growing presence in the high end of the smartphone market, a segment that the iPhone has historically dominated. Samsung’s hugely successful launch of the high-end Galaxy S III, which sold more than 10 million units in under two months, has no doubt played a big role in helping it extend its lead over Apple in the recent quarter.

So, should Samsung’s strong resurgence in the smartphone market have Apple worried?

iPhone 5 and Emerging Markets Will Be Key

Not really, considering that Samsung’s big market share gains largely came at the expense of others such as Nokia (NYSE:NOK) and Research In Motion (RIMM) as opposed to Apple, which lost less than 1% market share. Also, the iPhone 4S was more than two quarters old when the Galaxy S III was launched. With numerous rumors about the iPhone 5 circulating in the media, we believe that many customers may have postponed purchasing new iPhones in anticipation of the iPhone 5. This could be easily gleaned from Apple’s last quarter financials as well, which showed that the company’s margins came under pressure from a drop in the iPhone’s average selling prices (ASPs). What this means is that the iPhone mix tilted toward the low end, probably because many high-end smartphone buyers deferred their iPhone purchases until the launch of the iPhone 5, while lower-end purchases remained steady.

The pent-up demand might mean a phenomenal holiday quarter for Apple, like last year, but it also puts its stock under the risk of the iPhone 5 not meeting customer expectations. Meanwhile, the company’s margin compression could continue into the next quarter as well, as expectations of an imminent iPhone 5 release strengthen.

However, the fact that emerging markets are still a largely unexplored market for Apple keeps the upside potential intact. China, for example, holds a lot of promise for Apple considering the huge 2G subscriber base that the carriers there are trying to transition to 3G (3G penetration is currently only 17% in China and growing at a good rate). A deal with China Mobile, the largest carrier in the world by subscriber base, is looking increasingly likely following Qualcomm’s recent announcement and Apple’s similar deals with the other two carriers. This deal would be very important for Apple as it would instantly double its addressable market for the iPhone in China and could act as the next big boost to its stock. This is especially true because the iPhone accounts for more than 55% of the company’s value, according to our estimates.

We have a $700 price estimate for Apple’s stock, about 20% ahead of the current market price.

Disclosure: No positions.

Source: Apple Falls Behind Samsung In Smartphone Sales, But iPhone 5 Is Near