JPMorgan sees a ‘mini-turnaround’ for HTC

COUNTING ON ONE::The brokerage has raised its rating for the smartphone maker on the back of its latest product, but said the firm was still facing market challenges

By Helen Ku  /  Staff reporter

Sat, Apr 13, 2013 - Page 13

Smartphone vendor HTC Corp (宏達電) is likely to see a “mini-turnaround” soon, as its new flagship product has received better-than-expected market reaction, JPMorgan Securities (Asia Pacific) Ltd said yesterday.

While the brokerage decided to upgrade its rating for the stock to “neutral” from “underweight” and raise its target price for HTC’s shares to NT$330 from NT$160, JPMorgan said the Taiwanese company would still face challenges ahead in the competitive smartphone market.

HTC shares closed up 1.95 percent yesterday at NT$261.5 in Taipei trading, outperforming the broader market, which fell 0.46 percent.

The shares have rallied after telecom operators reported healthy demand for the new HTC One since its launch in this country, Germany and the UK last month.

The company is scheduled to launch the new model in the US on Thursday next week and in China on April 24.

“We view ‘One’ as a killer product that could fuel [for HTC shares] a between 30 and 50 percent rally in between three and six months,” JPMorgan said.

HTC shares have risen by 3.77 percent over the past six months, but declined 55.3 percent from 12 months ago, as the firm suffered from falling market share, and declining revenues and earnings.

As a result, the new HTC One smartphone is seen as the Taoyuan-based company’s last chance to make a comeback.

During the first quarter of the year, HTC posted record low earnings per share of NT$0.1, although most analysts had expected the company to report losses for the quarter because of delayed shipments of the new flagship product.

JPMorgan said its latest check with HTC’s supply-chain companies showed that the company has improved its component shortage problem.

Therefore, the brokerage forecast HTC would see sales expand by 50 percent on a quarterly basis and a 5 percent increase in operating margin.

Still, the component shortage issue might not fade out until June, according to the report.

Most analysts said that as long as the company can significantly improve its components shortage problem this quarter, shipments of various HTC products, including the 5-inch Butterfly, would increase substantially in the coming months.

JPMorgan yesterday lifted its forecast for HTC’s shipments to between 1.2 million units and 2 million units this month and next month, from between 500,000 and 700,000 units it forecast earlier.

With a much more proactive marketing approach that is no longer “quietly brilliant,” HTC might see its brand image regain popularity thanks to the newly launched HTC Facebook smartphone, JPMorgan said.