Smartphone maker HTC Corp’s (宏達電) share price yesterday hit an eight-year low after the company on Friday released sales and net profit figures that missed brokerages’ estimates.
HTC shares closed down by the daily limit at NT$189 in Taipei trading, underperforming the benchmark TAIEX, which fell 1.44 percent.
Despite second-quarter sales of NT$70.7 billion (US$2.34 billion) being in line with the company’s guidance of NT$70 billion, and with earnings per share improving to NT$1.50 from NT$0.1 in the first quarter, the company’s low operating margin of 1.5 percent signaled that HTC’s new flagship One model is unlikely to sustain its early popularity, causing several brokerages to slash their ratings and target prices on the firm.
“The market was overexcited by the high numbers in May and overestimated demand,” Arthur Hsieh (謝宗文), chief electronics and hardware analyst at UBS Securities, said in a report released yesterday.
Hsieh said HTC should follow its competitors and continue raising its marketing spend, given that product differentiation is becoming increasingly limited between flagship smartphones.
Downbeat on HTC’s chances of recovering from posting a record-low net profit last year, Hsieh forecast HTC’s sales would improve by 6.08 percent quarter-on-quarter to just NT$75 billion this quarter with net profit more than doubling to NT$3.7 billion from NT$1.25 billion during the April-to-June period.
UBS retained a “sell” rating on HTC shares with its target price unchanged at NT$155.
In a client note released yesterday, Credit Suisse analyst Pauline Chen (陳柏齡) retained a “neutral” rating on the firm’s shares, but trimmed her target price from NT$290 to NT$180.
Chen said component order cuts from Apple Inc and Samsung Electronics Co suggest that growth in the high-end smartphone segment is decelerating, exacerbating HTC’s woes.
Taipei-based Macquarie Securities analyst Daniel Chang (張博淇) suggested HTC might consider tie-ups with Chinese smartphone makers in order to survive.
“We believe HTC may need to seriously consider a partnership with another smartphone company that could provide synergy,” Chang wrote in a report released yesterday.
Chang said HTC is in a precarious position, adding that forming a partnership with Chinese firms may yield a better outcome for the Taiwanese company as it has established a solid brand in the market, but still faces difficulties in penetrating the Chinese market.
Chang gave a “underperform” rating on HTC stock with a target price of NT$148.
Chang forecast that HTC’s sales would decline 4 percent sequentially during this quarter, with a falling average selling price and shipments remaining flattish.
US bank Citigroup Inc said it expects HTC One shipments to decline to about 2.8 million units in the third quarter, but its overall smartphone shipments to increase by about 5 percent quarter-on-quarter.
Because of the erosion in average selling price caused by the HTC One’s declining sales volume and a deterioration in the company’s product mix, Citigroup said it expects HTC’s third-quarter revenue to be relatively unchanged from the second quarter.
The bank maintained a “sell” rating on HTC stock while cutting its target price from NT$205 to NT$134.
Meanwhile, Hong Kong-based brokerage CLSA Asia-Pacific Markets downgraded HTC shares to “sell” from “buy” and reduced its target price from NT$360 to NT$145, saying that HTC’s latest flagship model would is unlikely to help the firm regain sales momentum, even in the short term.
With Samsung targeting growth of 50 percent for its premium models this year and Apple aiming for between 15 percent and 25 percent growth in iPhone sales, the premium phone segment will become increasingly crowded and further pressure HTC’s margins, CLSA said.