MediaTek shares extend losses amid weak sentiment, low sales
Shares of MediaTek Inc. ( ), one of Taiwan’s leading integrated circuit designers, fell again Tuesday morning as pessimism lingered from the company’s lower-than-expected sales guidance issued last week, dealers said.
The selling also reflected fears that foreign institutional investors will continue to cut their holdings of MediaTek shares after many foreign brokerages cut their target prices for the stock, they said.
As of 11:49 a.m., shares of MediaTek had fallen 6.86 percent to NT$278.50 ( US$8.81) with 20.70 million shares changing hands. The weighted index on the Taiwan Stock Exchange was down 0.38 percent at 8,490.78.
MediaTek shares encountered heavy pressure soon after Taiwan’s stock exchange opened, sustaining the downward momentum seen a day earlier when the stock fell the maximum 10 percent and hit a 30-month low of NT$299.00.
“After the stock fell below NT$ 300 yesterday, it became very fragile technically,” Ta Ching Securities analyst Andy Hsu said. “It was no surprise that selling continued today, and there are few signs the stock will soon find technical support.
the stock has been seriously hurt by MediaTek’s sales forecast for the third quarter and the cut in its estimate for smartphone chip shipments in 2015,” Hsu said.
At an investor conference held on July 31, MediaTek said its consolidated sales in the third quarter could range between NT$51.7 billion and NT$55.5 billion, up 10-18 percent from a quarter earlier.
Q3 Consolidated Sales 20%
Lower Than Expectations
That was about 20 percent lower than market expectations, which were high because the third quarter is the traditional peak quarter for the global IC industry.
MediaTek trimmed its forecast for 2015 smartphone chip shipments to 400 million units from 450 million units previously, and it cut its projection for shipments of chips used in tablet computers by about 10 percent to 45 million units.
The IC designer also expected its consolidated sales for 2015 to fall 5-10 percent from 2014.
“Based on these forecasts and the moves to cut its shipment predictions, I think that 2014 was a peak for the world’s smartphone business, in particular for the Android camp. MediaTek cannot iso- late itself from such a slowdown in 2015,” Hsu said.
Facing Escalating Price
“MediaTek is facing escalating price competition, in particular from rival Qualcomm Inc. That’s why the Taiwanese firm has suffered a decline in its profit margin,” Hsu said.
According to MediaTek, its second quarter gross margin fell 1.4 percentage points from the first quarter to 45.9 percent, and the third quarter figure is expected to fall further to range between 42.5 percent and 45.5 percent.
Hsu said foreign institutional investors have been net sellers of MediaTek shares since March, and their selling has been stepped up in recent sessions amid concerns over MediaTek’s sales outlook.
According to Hsu, foreign institutional investors sold a net 55 million MediaTek shares between March 9 and Aug. 3, contributing to a 35 percent decline in the stock’s value.
Several foreign brokerages have cut their target prices for MediaTek shares, with one setting a target as low as NT$225.
“If the stock fails to end above NT$280 today, it could continue to trend lower and test the NT$240 level in the near future,” Hsu said.