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July 26, 2017

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Shares of Pegatron plunge on Q2 results

TAIPEI -- Shares of Pegatron Corp., one of Taiwan's leading contract notebook computer makers, took a beating Friday morning after the company reported lower-than-expected results for the second quarter, dealers said.

Concerns over falling demand for personal computers were running deeper, in particular after Pegaron forecast a 15- to 20-percent quarterly drop in its notebook computer shipments for the third quarter, dealers said.

A dive of shares of Hewlett-Packard Co., the world's largest PC vendor, on Wall Street overnight caused by its cautious assessment of its earnings outlook also prompted investors to dump Pegatron shares on the Taiwan Stock Exchange, dealers added.

As of 11:29 a.m., shares of Pegatron had dropped 7 percent, the maximum daily decline, to NT$37.00 (US$1.24), with 8.09 million shares changing hands. The benchmark weighted index was down 0.35 percent at 7,478.67 points.

"The global PC business has been affected by weakening demand in Europe and the U.S. amid a worldwide economic slowdown," MaterLink Securities analyst Tom Tang said. "Pegatron's second quarter results just confirmed the trend."

At an investor conference Thursday, Pegatron reported NT$822 million in net profit, down 35.6 percent from the first quarter, with earnings per share dropping from NT$0.57 to NT$0.36.

The market had expected an EPS of between NT$0.6 and NT$0.8 on the company's shares for the April-June period.

HP shares on Wall Street fell more than 8 percent after it trimmed its annual earnings forecast for the year.

"The selling in both HP and Pegatron showed investors' shaky confidence in the global PC industry," Tang said, adding that the PC business has been affected by falling profit margins.

Pegatron reported a quarterly drop in its gross margin for the second quarter, from 3 percent to 2.9 percent.

Tang said investors also seized the disappointing results as an excuse to pocket their gains from recent sessions.

Since mid-July, Pegatron shares have risen more than 20 percent largely on speculation that the company has won fresh orders from Apple, he said.

Although Pegatron expects that the launch of new notebooks and tablets bundled with Microsoft's Windows 8 operating system will drive up its sales in the fourth quarter, it seemed that the market was unwilling to buy into the upbeat assessment, Tang said.

"The PC market remains haunted by uncertainty over demand, therefore many investors are cutting their holdings in Pegatron shares despite the expected turnaround," Tang said.

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