HTC Corp (宏達電) shares yesterday surged by the daily limit for the third consecutive session to NT$125.5, raising reservations about their prospects given the firm’s poor earnings results.
Yuanta Securities and Investment Consulting Co (元大投顧) attributed the recent rallies to technical short-covering that might not be sustainable.
“It is a short-covering rally for HTC shares that might soon face price corrections, judging from its weak fundamentals,” Yuanta Securities analyst Jeff Pu said by telephone.
HTC reported a net loss of NT$15.53 billion (US$472.47 million), or a loss per share of NT$18.79, last year due to soft smartphone sales. The company’s combined revenue plunged 50.34 percent annually to NT$10.67 billion in the first two months of this year.
However, HTC share prices have risen 46.79 percent so far this year, according to Taiwan Stock Exchange data.
HTC’s aggressive promotion of its virtual reality (VR) product, the HTC Vive, likely accounts for the rally and has prompted investors to buy back their earlier bearish bets, Pu said.
“As HTC’s core business, the smartphone segment, faces challenges, its share prices will soon drop,” Pu said, adding that Yuanta’s target price for HTC is NT$60, much lower than yesterday’s closing price.
It is wise for the company to shift its focus from smartphones to other products, such as HTV Vive, but the new technology is likely to generate limited profits given its modest shipments for this year, Pu said.
HTC is likely to ship 400,000 to 500,000 VR headsets this year, which might boost overall revenue by 6 percent to 7 percent based on pricing of US$799 per unit, the analyst said.
“It [the Vive] is likely to help, but not likely to be strong enough to produce a turnaround this year,” he said.
SinoPac Securities Investment Services Co (永豐投顧) was upbeat, saying HTC’s stock price would climb higher because VR headsets are competitive.
“Compared with other products, HTC Vive devices are more comfortable. Its technologies are ahead of others in the market,” a SinoPac analyst, who declined to be named, said by telephone.
The smartphone vendor is to enter mass production for the Vive as the product is to be available on April 1 and the market is assimilating the upcoming launch, the analyst said.
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