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Samsung Note 7 crisis causes profits to plunge, but investors are still bullish on the stock

Shares of Samsung Electronics finished higher Thursday despite the Note 7 recall crisis causing a 96 percent plungefor the operating profit of the company's mobile division in the third quarter.
Rather than a sell-off of Samsung's stock on the back of earnings, investors remain bullish for a number of reasons.
Profit plunge baked into price
Earlier this month, Samsung had already warned that it would take a more than $5 billion hit to operating profit from the third quarter of 2016 up to the first quarter of 2017.
Samsung had slashed its operating profit guidance, with final results on Thursday coming in line with expectations.
The South Korean electronics giant now said that it aims to boost fourth-quarter earnings through its flagship Galaxy S7 smartphone as well as lower-tier models. Investors are expecting the third quarter to be the bottom for Samsung.
Also, if the fire issues had not plagued the Note 7, Samsung would have shipped around 11 million of these devices. That is a small fraction of the total 310 million smartphones globally it's expected to ship this year, according to analysis firm Counterpoint Research. So investors see little long-term impact.
The only unknown is whether this will damage Samsung's brand and affect the sales of other smartphone models.
Strength in new display and memory tech
Samsung's semiconductor and display business were bright spots in the third quarter with the company pioneering new chips and screen technology.
"In memory they are the global leader, and we have heard demand trends are strong, supply is constrained which is good for pricing," Neil Campling, senior research analyst at Northern Trust Securities, told CNBC by phone.
In addition, Samsung is the market leader in so-called organic light-emitting diode (OLED) display technology for small screens used in smartphones and other devices. Campling said mobile devices are moving from liquid crystal display (LCD) technology to OLED. This should help Samsung.
"In small size OLED Samsung is the 600 pound gorilla," Campling said.
Heir apparent appointed to the board
On Thursday, shareholders approved the appointment of Lee Jae-yong to Samsung's board. He is the grandson of Samsung's founder and the move is seen as an important step as Samsung navigates the choppy waters post-Note 7 recall.
He is the South Korean giant's heir apparent and was said to be a key player behind the scenes since his father was unable to lead after a heart attack in 2014.
His appointment comes just weeks after activist hedge fund Elliott Management called on Samsung to simplify its complex ownership structure, which is made up of around 70 "chaebols" or subsidiaries.
Investors feel that the younger Lee will be the person who can bring more clarity and transparency around the company's corporate governance. The company said it would respond to Elliott Management's letter by the end of November.
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