HTC Corp (宏達電) shares plunged 6.93 percent yesterday after Daiwa Capital Markets cut its target price to NT$240 from NT$320, the latest in a slew of downgrades by analysts on disappointing quarterly results and a dismal outlook in the face of intensifying competition from Apple Inc and Samsung Electronics Co.
HTC, the world’s No. 4 smartphone brand, is expected to have a flattish final quarter in terms of revenue, after generating NT$70.3 billion (US$2.4 billion) in revenue last quarter, Daiwa analyst Birdy Lu (呂家霖) said in a report released yesterday before the stock market opened.
The sequential growth of between 10 and 15 percent that some analysts had forecast was out of reach, according to the report.
Lu maintained a “sell” rating on HTC shares, which fell to NT$248.5 yesterday in Taipei trading.
Daiwa’s six-month target price of NT$240 for HTC was not particularly low, compared with the NT$160 set by JPMorgan.
“After a disappointing year (we forecast a 30 percent drop in sales and a 60 percent decline in earnings per share [EPS] in 2012), we project another lackluster year in 2013 (with 1 percent year-on-year sales growth, but an 18 percent year-on-year decline in EPS due to margin and average selling price erosion),” Lu wrote in the report.
Lu also slashed the firm’s forecast for HTC’s net profits for this year by 34 percent.
This year, HTC is expected to make NT$20.16 billion in net profit, or NT$23.66 a share, he said.
He also cut by 26 percent and 12 percent the company’s net income next year and in 2014 to NT$17.17 billion and NT$17.4 billion.
“In our view, HTC still has good products, but it needs something else to compete with Apple and Samsung,” Lu said, adding that it was “a brand, marketing and distribution issue.”
As smartphones became more of a mainstream consumer product, rather than a niche product for tech-savvy individuals as they were before, brand power and distribution networks became more important, he said, adding that Samsung is stronger in those two areas.
In addition to its massive marketing budget, Samsung has better relationships with mobile operators, especially in Latin America, he said.
To make a breakthrough, HTC would need to see either a significant jump in its next-generation products, or formulate a clever and effective marketing campaign without overspending, he said.
“Both are very challenging tasks. We therefore maintain our negative view on the company,” he said.
At home, HTC has made a major change in its marketing strategy to test the waters.
The Taoyuan-based company recently hired popular Japanese girl band Nogizaka46 to promote its new smartphone, the HTC J, which is only on sale in Japan and Taiwan.
It was the first time HTC has hired pop stars to endorse its products.
It has paid off, because the HTC J soon became a hit among subscribers of Japanese No. 2 telecoms operator KDDI when it went on sale in May.
In Taiwan, HTC is collaborating with Taiwan Mobile Co (台灣大哥大) to sell the smartphone.