Shares of Xiaomi (OTC: XIACF; HKEX: 01810) started strong in Hong Kong Wednesday but soon dropped nearly 6% after UBS analysts downgraded their rating from “neutral” to “sell."
Analysts also lowered the target price from HK$23 to HK$22 per share citing a few unfavorable factors in the report.
China’s mobile game economy shifting away from app store operators is one of the top concerns. Uncertain regulatory risks from the national financial technology authority represented another big factor in the downgrade.
The report praised Xiaomi’s hardware growth momentum, and have raised the company’s 2020 to 2022 smartphone sales forecast to 154 million, 184 million and 206 million units, respectively.
But the analysts wrote, “it is not the main net profit growth engine.”
In October, Morgan Stanley also downgraded Xiaomi from a Buy rating to Neutral. According to Morgan Stanley analysts, Xiaomi’s growth momentum is expected to slow because of growing competition.
Domestically, Huawei's attempts to stay in the mobile phone market is bad news for Xiaomi, and at the same time, Xiaomi is facing increased competition in India.
Just a week ago, Xiaomi launched its new flagship smartphone - Mi 11, the world’s first Snapdragon 888 smartphone with a 120Hz QHD+ AMOLED display and three rear cameras setup.
The stock of Xiaomi peaked at HK$35.7 per share Monday in Hong Kong, a leap of more than 40% from a month ago. The all-time high gave the company a market cap of more than $100 billion.
Xiaomi has become the 13th stock on the Hang Seng Index to exceed $100 billion in market capitalization, Bloomberg reports.