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JP Morgan Chase cuts target price on Asustek shares

JP Morgan Chase cuts target price on Asustek shares

Taipei, Aug. 25 (CNA) JP Morgan Chase has lowered a target price to NT$300 (US$10) from NT$350 on shares of Taiwan-based Asustek Computer Inc., one of the world's leading personal computer vendors, amid concerns over its slowing shipment growth in the third quarter. In a recent research note, JP Morgan Chase said a survey conducted by the brokerage cited Asustek's distributors and suppliers as saying the PC vendor is faced with inventory adjustments in Europe. JP Morgan Chase said weakening demand in Europe amid lingering debt problems in the region is affecting demand for high-tech gadgets. As a result, the brokerage anticipated Asustek's third quarter notebook computer shipments will stay unchanged or rise slightly from the second quarter. In the first quarter, Europe accounted for 36 percent of Asustek's total sales, while notebook computers made up 61 percent of the company's total revenue. JP Morgan Chase said it had previously estimated Asustek's notebook computer shipments for the third quarter would grow 10-15 percent from the second quarter, but the survey has changed the brokerage's views about the PC vendor's shipment outlook. The brokerage said Asustek is unlikely to meet a market consensus that it's notebook computer shipment growth for the third quarter could hit at least 10 percent. JP Morgan Chase said the slowing growth in notebook computer shipments will drag down Asustek's operating margin from an estimate of 5.5 percent for the second quarter.
Due to the weakening operating margin, JP Morgan Chase said investors have been advised to pocket the profit they have built on Asustek shares in recent sessions. The brokerage has also downgraded its recommendation on the stock to "neutral" from "overweight." Shares of Asustek closed down 3.10 percent at NT$281.00 on the Taiwan Stock Exchange Friday, when the benchmark weighted index ended down 0.36 percent, at 7,477.53 points. In response to JP Morgan Chase's research note, Asustek said its sales, earnings and shipments for the third quarter will continue to grow. The PC vendor said it will release its guidance for the third quarter in an investor conference scheduled for Aug. 29, when the company will release its second quarter results. (By Lo Hsiu-wen and Frances Huang)


Updated : 2021-01-16 10:56 GMT+08:00