Nomura downgrades HTC shares on slowing growth

NOSEDIVE::Shares in telecommunications firm HTC tumbled by as much as 3.6 percent in morning trading yesterday on the Taiwan Stock Exchange

Staff writer, with CNA

Fri, Jul 05, 2013 - Page 13

HTC Corp (宏達電) is still facing structural challenges as growth in the high-end smartphone market decelerates, Nomura Holdings Inc said yesterday in a research note.

The brokerage downgraded HTC shares to “reduce” with a target price of NT$180, major reversals of its “neutral” rating and NT$318 target price set in its previous report released on June 4.

It also cut its earnings estimates for HTC by 29 percent for this year, by 44 percent for next year and by 36 percent for 2015, citing the decelerating growth of the high-end smartphone market and HTC’s weak position in the mid- and low-end markets.

“The over-concentration on the new One model could cause high earnings risk for HTC. Now we believe that the risk could come earlier than expected,” Taipei-based Nomura analyst Anne Lee said.

Lee predicted that HTC will launch a mid-range HTC One mini-model late in the third quarter, and a higher-end phone called the T6, plus an updated model of the Butterfly phone in the fourth quarter.

However, their impact will be limited, as the HTC One mini might not be particularly cheap based on its specifications, such as a metal casing, while the company’s high-end models might only be available in some regions, she said.

Lee expects HTC’s third-quarter sales to fall 2 percent from a quarter earlier, compared with the market consensus of between 5 percent and 10 percent.

HTC shares fell by as much as 3.6 percent in morning trading yesterday on the Taiwan Stock Exchange. The stock had plunged 31.52 percent this year when it closed at NT$207.5 on Wednesday.

In a separate report yesterday, UBS Securities forecast HTC’s third-quarter sales will grow only 6 percent sequentially because demand for the new HTC One could have peaked and other models are not gaining enough traction with consumers.

Though the new HTC One has received positive reviews, the leading product designs have not translated into a meaningful upside in shipment volume, the Swiss brokerage said.

“Within the smartphones, the momentum for low-end could be better than the high-end,” said UBS analyst Arthur Hsieh, who rated “sell” on HTC, with a NT$155 target price.