JPMorgan analyst Gokul Hariharan has lowered its investment rating for Xiaomi from 'Neutral' to " Underweight" with the target price being raised from 8.4 yuan to 9 yuan.
JP Morgan said that Xiaomi has risen 12% year-to-date, reflecting strong growth in China's 5G sector and overseas business. But Xiaomi may not achieve profitable growth this year, it said.
JP Morgan still believes that Xiaomi's market share in domestic 5G mobile phones and the growth of monthly active users are unlikely to increase significantly, mainly due to fierce competition from Huawei, OPPO and Vivo.
In addition, a large amount of investment in smart phone research and development and marketing may drag down the profit margin of the hardware business. JP Morgan also said that the growth of core Internet services is also challenging, mainly due to the current sluggish advertising and the emergence of a large number of low-quality Internet finance.
JP Morgan said that the market still focuses on Xiaomi's ability to gain market share in overseas markets, but the bank is particularly concerned about the competition from Realme and Vivo in the Indian market this year, and the impact of new crown pneumonia in Europe on smartphone demand.
JP Morgan Chase lowered Xiaomi's adjusted earnings per share for the next two years by 7% and 2%, which is 15% lower than market consensus.
