HTC Beats Profit Estimates; Analysts Remain Skeptical

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Taiwanese smartphone maker HTC Corp (TPE:2498) ongoing efforts to redefine the company to compete in a rapidly changing consumer electronic device market seem to be paying dividends. The company released a strong second quarter earnings report Thursday, July 3rd, with profits surpassing consensus analyst estimates.

The firm is wagering that it’s new flagship smartphone, the HTC One (M8), will help give sagging smartphone sales a big boost. HTC Corp has also reduced costs through outsourcing and optimizing their supply chain.

Details on HTC Q2 earnings report

HTC Corp (TPE:2498) enjoyed a 2Q net profit of 2.26 billion New Taiwan dollars (U.S. $75.6 million), up 80% from the second quarter in 2013 and up quite nicely from a net loss NT$ 1.88 billion in the previous quarter. A survey of 16 analysts who cover HTC anticipated the second-quarter net profit would average NT$ 2.09 billion.

The rebounding smartphone maker also posted an operating profit of NT$ 2.43 billion, the first operating profit following three straight quarters of operating losses.

Revenues for the three months ending June 30th added up to NT$ 65.06 billion, just edging above of the company guidance of NT$ 65 billion – NT$ 70 billion.

Analysts not convinced

Despite the relatively strong performance in 2Q, a number of analysts are still not convinced HTC can maintain momentum in their comeback efforts..

Analysts point out consumer industry giants such as Apple and Samsung Electronics are launching their next-generation smartphones in the second half of the year, which is likely to hurt M8 sales. CIMB analyst Wanli Wang opined HTC’s revenue might slip further to NT$45 billion in both the third and fourth quarters.

“As features of Android phones are becoming more homogeneous to consumers, their life-cycle is now at best two to three months. I don’t see a clear catalyst for HTC in the second half this year,” Wang explained.

Wall Street insiders Goldman Sachs also wrote in a research note released before earnings Thursday that, “We believe 2014 could be the third consecutive year in which the peak quarter is [the second quarter.]”

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