Analysts yesterday lowered their earnings estimates and cut target share prices on E Ink Holdings Inc (元太科技) after the electronic paper display (EPD) supplier reported weaker-than-expected financial results for the second quarter.
On Tuesday, the firm reported a net loss of NT$818 million (US$27.28 million) in the second quarter, or a net loss per share of NT$0.76, which was larger than a net loss of NT$787 million, or a net loss per share of NT$0.73, in the first quarter. Gross margin also dropped to 0.6 percent from 1.1 percent in the first quarter.
Analysts like Credit Suisse’s Jerry Su (蘇厚合), JPMorgan’s Narci Chang (張恆) and Grand Cathay Investment Services Corp’s (大華投顧) Jeff Chang (張明祥) said in their latest reports that E Ink’s results were contrary to the market’s expectations that losses would narrow in the April-to-June quarter.
Su blamed the E Ink’s declining gross margin mainly to its continued low EPD utilization, an unfavorable product mix and increasing labor cost in China.
“We think the first half will be the trough for E Ink’s revenue and profitability,” Su said, “but full year could be in a loss.”
Credit Suisse forecast E Ink to report a net loss per share of NT$0.93 this year and earnings per share of NT$2.67 next year. It earlier predicted the company to report EPS of NT$1.5 this year and NT$3.39 next year.
Share price of E Ink, which has dropped 18.73 percent so far this year, ended at NT$32.1 yesterday, up 0.94 percent from Tuesday.
Credit Suisse cut its target price on the stock from NT$35 to NT$30, while JPMorgan lowered its target price to NT$23 from NT25.
“The biggest challenge for E Ink will be cannibalization from lower priced tablets, while the bullish camp is still hoping for a turnaround in the traditional peak season,” Chang said in a note.
Grand Cathay Investment's Jeff Chang said he kept a “neutral” rating on E Ink, with a target price of NT$36.8, but warned the company would not see a meaningful turnaround until the fourth quarter as the global e-reader market would remain stuck in a bottleneck this quarter.