Shares of HTC tumble on first-quater result worries

HTC's financial results for last month added to investors' worries. Yesterday, HTC reported its February sales stood at NT$11.4 billion, a decline of 26.6 percent month-on-month and 44 percent year-on-year.

At the end of trading yesterday, shares of HTC fell 6.41 percent to NT$255.5.

“Worries over a possible net loss escalated yesterday morning after the local media brought the issue to the forefront,” Hua Nan Securities analyst Henry Miao said. “Many investors fear that HTC will fail to reach its first quarter sales guidance.”

For the quarter, the smartphone vendor's sales could fall below NT$50 billion, compared with its guidance of between NT$50 billion and NT$60 billion, analysts said.

HTC had sales of NT$60 billion in the fourth quarter of 2012, down from NT$70.2 billion in the third quarter and NT$101.4 billion in the fourth quarter of 2011.

“Even worse, HTC is spending more on promoting its new models, including the latest HTC One. The higher operating costs are also eroding its bottom line,” Miao said.

“The best scenario is that HTC will just break even in the first quarter. But I don't rule out the possibility that the company will suffer a loss in the three-month period,” he said.

In a research report, Jih Sun Securities Investment Consulting said the weaker February sales reflected a shortage of voice coil motors that are used in smartphone camera modules, and it agreed that HTC could fail to meet the lower end of its first quarter sales target.

Miao said HTC is likely to rebound after the first quarter and post earnings in the following quarters.

“But as rival Apple Inc. and Samsung Electronics Co. are expected to launch new models, HTC could face stiff competition in the market,” Miao said.

“My brokerage expects the Taiwanese company will report a net earnings per share of NT$12-NT$13 for 2013, down from around NT$20 recorded in 2012.”

Miao said that because HTC's profitability is trending lower, investors may not be willing to accept as high a price-to-earnings ratio for the stock as they have in the past. “It is likely that the stock will test the NT$200 mark in the near future amid downbeat earnings prospects,” Miao said.

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