Shipments of Taiwanese smartphone maker HTC Corp.’s flagship phone are expected to fall by as much as 40 percent in the current quarter because of maturing demand in the high-end market, a foreign brokerage.
Macquarie Securities of Australia forecast that HTC One shipments will drop significantly to between 1.8 million and 2.1 million units in the third quarter of 2013, from around 3 million to 3.5 million units in the second quarter.
It is estimated that monthly shipments of the phone had dropped from over 1.5 million units in May to 1 million units in June, and would further decline to between 600,000 and 700,000 units per month during the July-September period.
“We believe HTC is still undergoing a structural downturn and we expect more downside surprises to come due to severe competition,” said Daniel Chang, an analyst at Macquarie Capital Securities Ltd.’s Taiwan Branch, in a research note.
“Despite the (Wall) Street resetting its expectations for the second half of 2013, we believe it is underestimating the impact of maturing high-end smartphone demand, which we expect will significantly affect HTC One’s sell-through results,” he said.
Chang estimated that the HTC One accounted for over 40 percent of HTC’s second-quarter shipments, or more than 60 percent of its sales, because of the phone’s higher price.
As a result, he forecast that HTC’s sales in the third quarter will fall by 15-20 percent, sharply below Wall Street’s expectation of a flat quarterly growth.
HTC, which saw its June sales drop by 24 percent from May, announced Thursday a downsized version of its flagship phone, the HTC One mini, to capitalize on the affordable phone market.
But Chang said such a refreshed model is not enough to save HTC if the original HTC One fails to create more good momentum for the company.
“We also think HTC will find it difficult to compete in the mid-low end market due to its current cost structure and lack of distribution channels,” Chang said.
He gave the stock an “underperform” rating and lowered the target price to NT$92 (US$3.07) from NT$148, the lowest level so far among the foreign brokerages that track HTC shares.
Kevin Chang, a Taipei-based analyst at Citigroup Inc., said it will be challenging for HTC to post a full-year earnings per share of NT$10 in 2013, in light of its high marketing expenses to compete with rival Samsung Electronics Co. and the slowing high-end smartphone market.
The analyst maintained a NT$134 target price on HTC shares, noting that it remains to be seen whether the company’s operating margin would deteriorate as fast as projected.
Shares in HTC fell by the maximum daily 7 percent to close at NT$168.5 in Friday morning trade on the local bourse.