Custom Search



Dangdang vs. Renren: Battle of the Chinese tech stocks

Posted by

I recently stumbled upon Sammy Pollack’s post at SeekingAlpha: 3 Reasons Why Renren Is A Better Buy Than Dangdang, and it got me wanting to dig deeper into the two companies to figure out which one I think is a better buy.

Pollack’s firmly entrenched in the Renren camp. Here’s why he’s like the “Chinese Facebook” better than the “Chinese Amazon” (Dangdang):

1) Facebook IPO. The Facebook IPO could drive up interest in Renren as a social networking play behind the Great Firewall.

2) Dangdang churn. The recent resignation of Dangdang’s CFO, Conor Chia-huang Yang, is a sign there could be trouble under the surface at Dangdang.

3) Cash. Renren’s in a stronger financial situation on paper. Indeed, Renren has $284.64 million in cash and equivalents compared to Dangdang’s $30.4 million, and Renren’s actually operating at a profit.

More arguments for Renren

When I first started writing this post, I expected to argue that Dangdang’s the better stock. My research since then has me leaning toward Renren. In addition to the arguments above, here’s why I like Renren over Dangdang:

1) Competition. Dangdang’s got competitors that are aiming squarely for the company’s throat. Among them? The true “Amazon of China”: Amazon.cn. Amazon acquired Joyo.com in 2004 and has been building up it’s presence in the country ever since. Even today, Amazon.cn gets slightly more internet traffic than Dangdang (per Alexa.com).

On top of that, though, both Amazon and Dangdang are overshadowed by 360Buy.com (a Chinese online retail site with backing from Walmart – NYSE:WMT). Renren’s got competition, too (namely in the form of Pengyou.com), but at least it’s neck and neck with Pengyou.com; not a distant competitor struggling to make up ground.

A Twitter-like microblogging site in China, Weibo.cn, could pose the biggest threat to social networks like Renren and Pengyou. Already Weibo gets more traffic, and it’s owned by the deep-pocketed Sina Corporation (NASDAQ:SINA). For now, though, Weibo’s operating more like Twitter and less like Facebook. If that should start to change, Renren should really get nervous.

2) Investors “like” social networks more than retailers. OK. We don’t have official numbers on what sort of market cap the public will give to Facebook, but apparently, Facebook valuations tossed around during the Instagram acquisition went as high as $104 billion (per Dealbook). That’s actually more than Amazon’s current market cap of $102.2 billion.

To sum it up

Let me make it clear that I don’t dislike Dangdang. In fact, I think the stock still has significant upside (and I’d be surprised if it isn’t being looked at by a lot of Western companies, including Amazon, as a potential takeover target).

During its most recent quarter, Dangdang generated $190 million in revenue. That was far more than Renren’s $32 million. Renren has much lower overhead and profit margins, though, so the social network was actually able to claim profitability. Dangdang, on the other hand, operates more like Amazon – forgoing profit in the short-run as it sets itself up for better returns in the future. That makes me like Dangdang in the long-term. In the near-term, though, I expect Renren to outperform Dangdang – particularly in the wake of Facebook’s IPO. Things are just too unsettled in the online retail space in China for investors to dump all of their cash in Dangdang.

Related

UNCOVER THE NEXT MINING GIANT


The Top 500 Gold and Silver Mining Stocks


CIRCLEUP, Y’ALL


A new way to invest in private companies with CircleUp


THINK IN PICTURES

When is Pinterest’s IPO date?


A JOLT TO THE SYSTEM


Why Citi says investors should stay away from silver


BLAZING A DIFFERENT PATH


3 reasons to invest in a Kickstarter IPO


ESCAPE THE CUBICLE, BEFORE YOU’VE GOTTEN THERE


How to earn $100,000 at age 15


Comments

comments

Powered by Facebook Comments

Tags: , , , , ,

Leave a Reply

Name and Email Address are required fields. Your email will not be published or shared with third parties.









Killer Articles

Top 10 best gold and silver ETF funds

Here’s a look at the Top 10 best gold and silver ETFs that trade on major U.S. exchanges. We’ve ranked them by volume, as some of the niche ETFs in the precious metals market are so... Read on.

3 reasons NOT to invest in Groupon’s IPO

An IPO date hasn’t been set, but here are three big warning signs you might want to consider before investing in Groupon’s stock... Read on.

From start-up to titan: The unofficial tech IPO calendar for 2012

From Facebook to Twitter to Groupon, the planned tech IPOs in 2012 could be among the most exciting string of new public companies... Read on.

How to invest in water stocks

Often overlooked as a commodity, water supplies could become increasingly critical as emerging economies around the world improve their diets and demand more agricultural resources for the production of meat... Read on.

World’s largest economies in 2050 will look very different

India’s rapid ascent to economic supremacy will be driven by a surging working age population, which will grow more than 40 percent between now and 2050... Read on.

How to invest in cotton stocks

If you’d like exposure to cotton markets without delving into futures and options contracts, a handful of cotton ETNs and cotton-related stocks are available... Read on.

How to buy Chinese Yuan

The Chinese yuan or renminbi has risen about 5 percent a year over the past five years, and some investors argue that China’s currency is still undervalued by 40 percent. If the dollar suffers ... Read on.

Five cheap franchises to start with less than $10,000

Franchises are so ubiquitous we often don’t realize we’re shopping at one. From McDonald’s to Hampton Inns and doggie day cares to campgrounds, they’re literally everywhere. All told, franchises account for 10.5 percent of all businesses in the U.S, and they... Read on.

Why invest in silver?

Ask 10 people why you should invest in gold and silver, and you’ll probably get 10 different answers – many of which will be accompanied by a shrug. Most investors don’t understand the motivation for holding gold or silver bullion. Nonetheless, it’s been difficult to ignore... Read on.

How to Invest in Copper

Copper isn’t as glitzy or glamorous as gold or silver, but in many ways it feels safer. Since copper is regularly used in electronics, it’s consumption per person (particularly in the developed world) has been on the rise for decades. So how does one invest in copper? Read on.