Decoding DangDang: Is China’s Amazon still a buy?

Losing money’s OK as long there’s a plan in place to start making it in the future. We’re hoping the departure of Yang isn’t a sign that Dangdang’s losing control of the ship.

E-Commerce China Dangdang Inc. (NYSE: DANG) got hammered yesterday on news CFO Conor Chia-huang Yang was departing after just 26 months in the saddle. The stock lost 15.31 percent or $1.56 a share. That wiped out $128 million in market cap in a single day of trading. Still, it’s unclear why Yang’s departing.

According to the press release, Yang is leaving for personal reasons and plans to stay on board for three months to help the company through its transition.

“Conor has made an important contribution to Dangdang since he joined in March 2010,” Peggy Yu Yu, Dangdang’s Executive Chairwoman, said in the release. “We thank him for his leadership and dedication to the company. We wish him all the best in his future endeavors.”

It could be something innocuous, but investors showed they have little tolerance for the faintest whiff of accounting problems at Chinese firms. Dangdang holders ran for the exit in droves – perhaps trying to lock in the gains they’ve gotten so far this year.

In fact, even after yesterday’s brutal sell-off, shares in Dangdang are still up 96 percent since Jan. 1. That – along with the performance of several other Chinese tech stocks – prompted us to write a recent article dubbing 2012 “The Year of the Chinese Tech Stocks.”

Late last week, Credit Suisse (NYSE: CS) downgraded Dangdang’s shares from “outperform” to “neutral.” Not a big surprise there after Dangdang’s monster run since the start of the year, though. In fact, Credit Suisse was just backing off the upgrade they gave Dangdang’s shares two months ago.

While we’re still bullish on Dangdang, we must concede this fact: the company’s last earnings report was a disappointment. Dangdang lost $0.26 per share in Q4 2011. Analysts were expecting a loss of $0.16 per share. Still, revenue was up 81.7 percent year-over-year and Dangdang is in a tooth-and-nail, knock-down, drag-out fight with several other online retailers in China (including their biggest rival 360Buy.com).

Losing money is OK as long there’s a plan in place to start making it soon. We’re hoping the departure of Yang isn’t a sign that Dangdang’s losing control of the ship. But for now, we’ll give them the benefit of the doubt.

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