HTC Corp (宏達電) has seen its sales gain strong momentum from its newly launched flagship products and made a bold prediction for its second-quarter revenue, but whether the growth is sustainable remains a question for industry watchers.
On Tuesday, HTC chief financial officer Chang Chia-lin (張嘉臨) told investors on a conference call that the company’s sales for this quarter could expand by between 96.37 percent and 111.48 percent from last quarter to a range of between NT$65 billion and NT$70 billion (US$2.16 billion and US$2.32 billion).
The company attributed its optimistic sales guidance to growing sales of its new flagship product, HTC One M8, and also its new the mid-tier model, the Desire 816.
The company also expects gross margin to reach between 21.3 percent and 22 percent this quarter, compared with 21 percent last quarter and 23.2 percent a year earlier, with earnings per share set to reach between NT$2.21 and NT$3 for the current quarter after posting losses per share of NT$2.28 for last quarter, Chang said.
“We like HTC’s good progress in delivering solid products in both the mid-range and high-end segments,” Daiwa Capital Markets analyst Kylie Huang (黃奎毓) said in a client note.
“However, we are concerned that its revenue momentum could peak this quarter, as we expect major competitors like Apple and Samsung Electronics to release new high-end products in the second half of the year,” she added.
Huang forecast HTC’s smartphone shipments next quarter would decline at a double-digit rate on a quarterly basis because the company is facing intensifying market competition, despite the traditional peak season.
HTC’s sales are therefore estimated to drop 18.8 percent to NT$57.71 billion next quarter from a prediction of NT$71.08 billion this quarter, and decline further to NT$47.23 billion in the following quarter, she added.
Hong Kong-based JPMorgan Securities analysts Alvin Kwock (郭彥麟) said in a separate note that upward pricing pressure is another challenge to the Taiwanese smartphone vendor as HTC aims to turn profitable with a more balanced product mix.
Although the M8 has so far been relatively unaffected by the pricing competition, HTC should be aware that it is in a dynamic market, where leader Samsung Electronics Co saw the price of its flagship handset, the Galaxy S5, collapse over the past month, and newcomer Xiaomi Corp (小米) also cut the price of its Mi3 handset model by 300 yuan (US$48) to 1,699 yuan, Alvin said.
However, UBS Securities chief electronics hardware analyst Arthur Hsieh (謝宗文) said he is impressed by HTC’s second-quarter guidance of returning to the black, expecting the company’s aggressive pricing strategy for its mid-tier Desire series and online distribution could further widen the company’s potential market.
“We believe the better time-to-market of the HTC One M8 has significantly helped sales revenue this year as consumers no longer need to wait for HTC to resolve component supply constraints,” he said in a report.
UBS upgraded its rating on HTC shares to “neutral” from “sell” and raised its target price for the stock to NT$180 from NT$97.
HTC’s shares closed down 1.71 percent at NT$172 in Taipei trading yesterday, underperforming the benchmark TAIEX, which slid 0.22 percent.
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