HTC Shares Crash On Monday; Trades Below Market Value

HTC Logo AH9

The fact that Taiwanese smartphone vendor HTC has been having a horrendous run of late, is not exactly a state secret anymore. The company’s sales are crashing and its stock price is following suit. While this has been happening for a while now, things came to a head on Monday, when the company’s stock price fell by as much as 9.8 percent to NT$56.80 ($1.79) at the Taipei stock exchange. At that price, the entire company is valued at a meagre NT$47 billion ($1.5 billion), which is actually below the NT$47.2 billion cash it was sitting on at the end of Q2, 2015. According to HTC’s quarterly financial report, the company’s cash-per-share stood at NT$57 at the end of June. The stock meanwhile, rallied late in the day to close slightly higher at NT$57.70 ($1.82).

Mr. Calvin Huang, an analyst at Sinopac Financial Holdings Co. said, “HTC’s cash is the only asset of value to shareholders. Most of the other assets shouldn’t be considered in their valuation because there’s more write-offs to come and the brand has no value”. The company’s Q3 earnings guidance is 48 percent below analyst estimates, and the company’s sales have fallen by as much as 75 percent since its peak in 2011. The company has been facing stiff competition from smartphone makers like Samsung and Apple at the premium end of the spectrum and companies like Huawei, Xiaomi and Lenovo at the mid-range. While the company has reportedly started enacting cost-cutting measures and focusing it attention on high-margin segments, analysts expect it to take a long time for these measures to percolate down, before they start having a positive effect on the company’s bottom line.

Analysts meanwhile, have downgraded the share-price valuation of the company’s stock to NT$55.54 for the near term. In a report dated August 7th, Mr. Birdy Lu, an analyst with Deutsche Bank AG sounded less than optimistic about the company’s efforts to get back to profitability. “We think these efforts are not enough to turn HTC around in the next two years”, he wrote. According to him, “HTC has little chance to compete with iPhone and Samsung given limited resources, and might continue to lose shares to Chinese brands in mid to low-end segment”.