Quanta Computer Inc’s (廣達) first-quarter results released on Friday, which were better than expected, prompted several foreign stock brokerages to raise their target share prices for the stock over the weekend, with Barclays expecting shares in the world’s largest maker of notebook computers to rise at least 24 percent over the next 12 months.
In a note to clients, Barclays said it was encouraged by the improvements in Quanta’s gross margin and operating margin in the first quarter of the year from a year earlier.
“We look for margins to remain stable in the second quarter and beyond, helped by a more non-notebook product mix, cheaper labor rates in Chong-qing and better notebook pricing,” Kirk Yang (楊應超), head of Asia tech hardware research excluding Japan at Barclays Bank, Hong Kong, said in the note.
Barclay’s target price of NT$92 on Quanta, which closed at NT$74.1 on Friday in Taipei trading, compared with UBS Securities’ NT$88, Bank of America Merrill Lynch’s NT$87 and NT$85 from RBS Asia Ltd.
The new target prices came after the Taiwanese company said on Friday that it expected notebook shipments from this month to June to increase by between 5 percent and 10 percent from the first three months of the year, while tablet shipments would grow about 70 percent year-on-year amid solid demand.
Quanta reported a net income of NT$5.17 billion (US$176.3 million) in the first quarter, down 21.9 percent quarter-on-quarter and 10.68 percent year-on-year. Earnings per share were NT$1.33 in the first three months, compared with NT$1.71 in the previous quarter and NT$1.49 a year earlier.
The company’s gross margin of 4.20 percent and operating margin of 1.8 percent beat analysts’ forecasts and improved from 3.6 percent and 1.5 percent a year ago.
With Quanta’s increased focus on the higher-margin cloud-computing business, it is expected to further improve profitability from the second half of the year, UBS Securities said in a separate note.
Quanta is expected to start shipments of new servers and Apple’s new MacBooks this quarter, which could lead to a sequential increase of 20 percent in revenue from NT$236.22 billion in the first quarter, UBS said.