Major brokerage houses yesterday slashed their target share price for Acer Inc (宏碁) after the world’s No. 4 PC maker on Wednesday posted its first quarterly loss in nearly a decade.
Credit Suisse, Goldman Sachs and Morgan Stanley downgraded their target price to NT$26, from NT$40, NT$30 and NT$30 respectively. Citigroup cut its target price to NT$30 from NT$35.
Shares in Acer tumbled by the 7 percent daily limit to NT$29.35 on the Taiwan Stock Exchange yesterday.
Goldman Sachs revised its Acer forecast to a loss per share of minus NT$1.32 this year and earnings per share NT$0.88 next year, from NT$0.09 and NT$2.50, respectively.
The actions are the result of the significant second-quarter earnings miss, the downward revision of its third-quarter operating margin guidance, an uncertain outlook for the fourth quarter and difficulty in quantifying any synergies from its recently announced iGware Inc acquisition, Goldman Sachs analyst Henry King (金文衡) said in a report.
Acer announced last month it would spend US$320 million to acquire cloud computing company iGware, whose major client is Japanese video-game firm Nintendo Co.
“While Acer is still expecting a fourth-quarter recovery, we do not see any concrete steps other than launching the new ultrabook in September, trying to lower third-quarter inventory to below normal levels and completing its organization restructuring,” King said.
The iGware deal may further dilute Acer’s profitability, he added.
“Investors will adopt a ‘wait and see’ approach on Acer until they see actual signs of a business turnaround,” said King, who rated Acer as “sell.”
Kevin Chang (張凱偉) of Citigroup Global Markets said it was hard to gauge the bottom of Acer’s share price because consumers could potentially delay purchase decisions and wait for the launch of Microsoft Corp’s latest operating system, Windows 8, in the second half of next year.
Other hindrances include further tablet PC cannibalization at the expense of conventional notebooks and Apple Inc’s dominance in the tablet PC space, Chang added.
Acer posted NT$6.79 billion (US$236 million) in losses in the second quarter due to write-offs for excess inventory and layoffs in Europe, Middle East and Africa (EMEA) operations.
Chairman and chief executive J.T. Wang (王振堂) on Wednesday conceded that the losses were greater than expected and Acer’s earlier target of making profits this year had become “impossible.”
Morgan Stanley said Acer might need syndicated loans in the second half to weather its financial storm.
“Europe used to be Acer’s most profitable region, but it is a drag now … Second-quarter EMEA PC shipments dropped 35 percent year-on-year. The shrinkage in scale led to substantial losses in the second quarter, and thus, the first operating loss in the core business since the second quarter of 2002,” Morgan Stanley said in the report.