HTC shares plunge on pessimistic Q3 forecast
Shares of Taiwan- based smartphone vendor HTC Corp. ( ) came under heavy downward pressure Friday after the company gave a gloomy forecast a day earlier for its performance in the third quarter, dealers said.
The current selling also reflected the lowering of target prices for HTC shares by several foreign brokerages, which sparked fears that foreign institutional selling of the stock will accelerate, they said.
As of 11 a.m., shares of HTC had lost 10 percent, the maximum daily decline, to NT$63.00, with 2.22 million shares changing hands. The weighted index on the Taiwan Stock Exchange was down 0.25 percent at 8,428.45.
At an investor conference Thursday, HTC said the company would likely post a loss per share in the July-September period ranging between NT$5.51NT$5.85, after posting a loss per share of NT$ 9.7 quarter.
“The forecast for HTC to post such a high loss per share has caught many investors off guard, and that’s why the stock faced heavy selling to fall 10 percent soon after the main board opened,” Hua Nan Securities analyst Kevin Su said.
Su said that when the stock hit the downward limit, there were still orders from investors to sell 7.5 million HTC shares. “I expect that the stock’s weakness will continue as market sentiment toward the company’s operations has become bearish,” he said.
HTC said the company is facing a product transition period during the current quarter but is hoping that a “holiday hero” will be unveiled in the fourth quarter to reverse the unfavorable trend.
“Several smartphone brands, including Apple Inc., have issued lower- than- expected guidance for the third quarter and HTC
cannot escape it,” Su said.
Non- core Business Losses
“But such a large loss estimated by HTC leads me to suspect that the company will suffer noncore business losses that will further undermine its bottom line in the third quarter.”
On July 21, Apple said it expected its sales for the current quarter to range between US$ 49 billion and US$ 51 billion, lower than an earlier market forecast of US$ 51.1 billion. The forecast sent Apple shares into a tailspin.
Following HTC’s investor conference, several foreign brokerages trimmed their target prices for the stock amid fears that HTC will not turn a profit in 2015, and the downgrade dealt another blow to the smartphone brand’s performance on the main board Friday, Su said.
In the first half of the year, HTC posted a loss per share of NT$9.27, and it could suffer a loss per share of NT$15 in the first nine months of the year if the third quarter forecast proves accurate.
Share Price Cut to NT$ 45
A U.S.-based brokerage cut its target price on HTC shares from NT$100 to NT$ 45, the lowest level among the foreign institutional investors tracking the stock. The U.S. brokerage maintained its “underweight” recommendation on HTC shares.
Taiwanese regulators forbid local media to reveal the names of foreign brokerages when they give price forecasts of specific stocks.
A Japanese brokerage cut its rating on HTC shares to “underperform” from “neutral” and lowered its target price to NT$60 from NT$70, while a European brokerage maintained its “sell” recommendation and cut its target price to NT$46 from NT$52.
“So wise investors should keep their hands off the stock for now. I do not see any immediate technical support,” Su said.