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September 26, 2017

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Foreign brokerages pessimistic after HTC reports expected net loss in current quarter

TAIPEI, Taiwan -- Several foreign brokerages offered downbeat assessments of HTC Corp. on Tuesday after the Taiwan-based smartphone vendor forecast a day earlier that it could report a net loss in the current quarter.

Barclays Capital said it would be hard for the Taiwanese smartphone's planned new flagship model — the HTC M8 — to stand out amid fierce competition in the global high-end smartphone market because the new product will have trouble differentiating itself.

The launch of the HTC M8 is unlikely to give a boost to HTC's share price, Barclays said, and it left its target price of NT$112 (US$3.68) for the stock unchanged and maintained an "underweight" recommendation on HTC shares.

As of 12 noon, shares of HTC had added 1.97 percent to NT$129.50 on a technical rebound. The weighted index on the Taiwan Stock Exchange was up 0.43 percent at 8,428.24.

At an investor conference held Monday, HTC said it could incur a net loss per share of between NT$2.1 and NT$2.6 for the first quarter this year after posting NT$0.38 in earnings per share for the previous quarter.

HTC forecast its consolidated sales for the January-March period to range between NT$34 billion and NT$36 billion, compared with NT$42.9 billion in the fourth quarter of last year.

The smartphone vendor said it expected that efforts to penetrate the lower cost smartphone market would help it regain profitability in the second quarter.

Morgan Stanley was skeptical that the strategy would work. It acknowledged in a research note that HTC is adjusting its product portfolio by devoting more resources to low and mid end models, but noted that the lower-end smartphone market is extremely competitive.

The brokerage maintained its target price of NT$72 for HTC shares and left its "underweight" rating unchanged.

BNP Paribas painted an equally pessimistic picture, saying that with Samsung Electronics Co. and Apple Inc. set to launch new models later this year, chances are slim that HTC will be able to expand its share of the global market.

BNP Paribas left its target price of NT$71 and "underweight" recommendation for HTC shares unchanged.

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