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May

2012

Groupon stock forecasts for 2012: Deal or no deal?

by Fred Marion

One of the best ways to make money off “hot” tech IPOs is by ignoring them for a year or so. By then, the market will have devoured all those overly-hyped novices who eagerly bought shares during the first week of trading, then sold them when they saw the value of their holdings crumble. That’s what appears to be happening to Groupon Inc. (NASDAQ:GRPN) right now.

And it’s a pattern that gets repeated a lot. I like to use one of the stocks I lost a lot of money on as an example: E-Commerce China Dangdang Inc. (NYSE:DANG) – the so-called “Amazon of China” (even though Amazon operates in China, too). The stock had its IPO on Dec. 10, 2010. It debuted around $32 an ounce. A year later, shares were bloodied. They plunged more than 80 percent to less than $5 a share.

If you would have bought at the start of 2011, though, you’d be quite happy with your returns. Since then, DangDang has shot up nearly 70 percent from $4.40 to $7.45. I think we’re on the verge of something similar happening with Groupon.

Shares in the daily deals site are in the long, painful process of shaking out the weak hands. The question is, when will the real institutional buyers start moving in? I would argue that the tipping point could be coming soon – particularly as a number of investment firms have started moving to upgrade the stock. Here are just a handful of the Groupon stock forecasts for 2012 that we’ve seen over the past month or so:

B. Riley & Co.: Upgrade from sell to neutral. Price target of $10.60 (per Barrons).

Evercore Partners: Upgrade from to equal weight to overweight. Price target of $15 (per Forbes).

FactSet Research: Seven buy ratings and 12 hold ratings. An aggregate price target of $21.44 (per the Wall Street Journal).

Reuters: The average price target of 25 analysts covering Groupon stands at $22.53 (per Seeking Alpha).

Even after an accounting error forced Groupon to revise revenue down $14 million last quarter, it’s hard to ignore the company’s growth profile – and the stock’s subsequently low valuation.

Indeed, Groupon’s valued at “roughly half the multiple that was reportedly offered by Google in which time Groupon tripled its quarterly revenue,” writes Ken Sena, an analyst with Evercore Partners, wrote in a recent research report. It doesn’t make sense then that the company’s more than twice the size it was at the time of offer but somehow worth just half the price.

That’s got me looking for the right time to start accumulating Groupon shares. In the words of hedge fund manager James Altucher, Groupon’s an “easy double” (per Seeking Alpha). I’d like to be there when that double happens.

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Tags: DANG, GRPN, tech stocks
Posted in Internet stocks, retail stocks | No Comments »

May

2012

Dangdang vs. Renren: Battle of the Chinese tech stocks

by Fred Marion

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.

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Tags: AMZN, chinese tech stocks, DANG, RENN, SINA, WMT
Posted in Chinese stocks, Internet stocks, tech stocks | No Comments »

Apr

2012

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

by Fred Marion

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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Tags: 360buy.com, chinese tech stocks, DANG
Posted in Chinese stocks, Internet stocks, tech stocks | No Comments »

Apr

2012

2012 is the year of the Chinese tech stocks

by Fred Marion

Since the start of the year, Chinese technology stocks have surged higher. That could be due, in part, to last year’s dismal returns, but if the last three quarters of 2012 look as good as the first, there’s lots of money to be made behind the Great Firewall.

In fact, all Chinese stocks (not only tech) that trade on American exchanges jumped 14 percent in the first quarter (per Bloomberg). The article sites two reasons for the sudden interest in all things Chinese: an uptick in manufacturing and predictions that the Chinese government will lower reserve requirements.

Still, it’s Chinese tech stocks that have really dominated the show in China in 2012. Here’s a quick look at some of this year’s top performers:

1) E-Commerce China Dangdang Inc. (ADR) (NYSE:DANG). +126% in 2012.
Dangdang.com models itself after Amazon. The company got its start in books and has been adding new product categories ever since. They’re also moving rather aggressively into the e-reader market in mainland China. Dangdang shares got a big boost recently, though, when the company announced a partnership with Gome Electrical Appliances Holding Ltd.

Gome is China’s second-largest electronics dealer, and the company recently started selling its wares on Dangdang. Dangdang may start selling their own wares on Gome’s Web site as well.

2) Renren Inc. (NYSE:RENN). +63% in 2012.
A Chinese take on Facebook, Renren operates the PRC’s most popular real-name social network. The fact that the site requires members to use their real names could actually be a boon as China’s started cracking down on illegal online commenting. Sites like Weibo (a Twitter-like service where real-name requirements are fairly lax) were recently forced to shut down their services for 72 hours as they worked to scrub illegal comments from their servers (again per Reuters). Those service interruptions can only strengthen Renren’s user base.

3) Baidu.com, Inc. (ADR) (NASDAQ:BIDU). +25% in 2012.
China’s most-visited web site is also the country’s leading search engine: Baidu.com. Baidu is the fifth most-visited Web site in the world with a global reach of more than 11 percent (meaning 11 percent of everyone in the world visits the site on a daily basis, per Alexa). Baidu’s revenues for Q4 in 2011 rose 82.5 percent over the corresponding period in 2010.

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Tags: BIDU, chinese tech stocks, DANG, RENN
Posted in Chinese stocks, Internet stocks, tech stocks | No Comments »

Jan

2012

Why are E-Commerce China Dangdang’s shares on fire?

by Fred Mason

There’s one stock in particular that drubbed my portfolio last year, and it happens to be E-Commerce China DangDang (NYSE:DANG). Fanfare was high when DangDang made its initial public offering in December 2010. That early love affair with “China’s Amazon” wore off quickly, though, and investors dumped shares like crewmen bailing water in a leaky boat.

DangDang shed more than 80 percent of it’s value in 2011 as shares free-fell from $30 to $4 a pop. I cringed every time I checked my 401K. But something magical seems to be happening for shares in 2012. Over the past month, DangDang has shot up 98 percent. What gives?

Here’s my assessment of why DangDang shares are recovering:

1) More users, more cashflow. DangDang used money from its IPO to expand its offerings and bolster the company’s distribution system. That’s helped drive up the number of orders at the site by 32 percent over the past year (per Fool.com). The site’s also driven up its total number of users to 5.5 million, up 36% over last year.

2) Renewed interest in Chinese stocks. With the Federal Reserve’s recent announcement that it plans to keep interest rates near zero until at least 2014, investors’ risk appetite has grown quickly. That’s pushed up a lot of Chinese stocks – and DangDang’s going along for the ride. Other winners include social networking company Renren Inc. (NYSE:RENN), up 60 percent since the start of the year, and video-streaming company Youku Inc. (Public, NYSE:YOKU), up 45 percent.

3) Robust EPS growth. According to CNAnalyst, DangDang’s long-term annual EPS growth should hit 53.3 percent. That puts it ahead of just about every top small-cap stock on the market besides Indian travel company MakeMyTrip Limited (NASDAQ:MMYT).

4) A new e-book platform. DangDang launched its e-book platform in December for use on iPhones, iPads and PCs. 50,000 book titles are available and each sale should net the company 20 percent of the sale price. Writer Kevin Chen expects DangDang’s ebook sales to start manifesting themselves in the company’s earnings reports in Q2 2012.

There are warning signs, though. For one thing, DangDang’s already blown through a lot of price targets for the company. Brokerage analysts have set an average target price of $8.01 (per CNAnalyst). DangDang’s competition could IPO soon, too (see our 2012 tech IPO calendar for more).

Despite the challenges the company faces, and the fact that it controls just 2.3 percent of the of B2C ecommerce market in China, investors seem to have warmed back up to DangDang. Shares still haven’t hit my dollar-cost-averaged price, but it’s a step in the right direction.

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Posted in Chinese stocks, Internet stocks, IPOs, tech stocks | No Comments »

Sep

2011

3 reasons to invest in the 360Buy.com IPO (Jingdong Mall)

by Fred Mason

In what’s shaping up to be the largest U.S. Internet IPO since Google, Inc. (NASDAQ:GOOG), the Amazon of China, Jingdong Mall has announced plans to go public. Jingdong publishes 360Buy.com, the 120th most-visited Web site in the world. That’s a far cry from Amazon.com (NASDAQ:AMZN), which is ranked by stats-tracking company Alexa.com as the 15th most-visited Web site in the world. 360Buy’s got momentum on its side, though, and that makes me bullish on the stock. Here are three reasons you should consider investing in 360Buy.com when the company IPOs next year:

1) Growth potential. China’s internet population (at 485 million+) exceeds the entire population of the U.S., and that number is expected to triple to 1.5 billion by 2015. That will make the leading e-commerce site in Asia an international powerhouse. Amazon.com currently gets 6.8 times as much traffic as 360Buy.com. But I wouldn’t be surprised to see 360Buy.com overtake Amazon. Not only will the China’s internet population dwarf that of the United States, but the country’s still in the early stages of e-commerce adoption. Last year, online sales in China rose 77 percent (per FT.com).

2) Not to be confused with Taobao.com. Taobao may get significantly more traffic than 360Buy.com, but it’s important to note that they have different business models. Taobao’s a consumer-to-consumer e-commerce site that’s more akin to eBay than Amazon. While eBay garnered more traffic than Amazon in the early years of the Web, that trend has since reversed itself. Expect the same pattern to unfold in China as consumers turn to the Web not just for hard-to-find items and collectibles but for everything from jackets to diapers and laptops (all of which 360Buy.com offers).

JingDong is, indisputably, the largest business-to-consumer e-commerce site. And it’s purest competition comes in the form of E-Commerce China Dangdang, Inc. (NYSE:DANG). DangDang, which IPO’d to much fanfare in December, has since lost nearly 75 percent of its share price amid a rash of accounting scandals at several Chinese firms.

3) Revenue giant. Revenue at 360Buy.com is expected to hit $4.4 billion in 2011 (per RenaissanceCapital). That’s not much when compared with Amazon’s $40 billion, but it blows away DangDang.com, which will likely do somewhere in the neighborhood of $400 million.

Already, 360Buy.com processes some 300,000 orders per day from 25 million registered users. If the site can maintain its handhold at the top of China’s retail market, it should reward investors nicely in the years to come.

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Tags: 360buy.com, AMZN, DANG, GOOG, Jingdong Mall
Posted in Chinese stocks, Internet stocks, IPOs, NASDAQ, private companies, retail stocks, tech stocks | No Comments »

Jun

2011

Do China Dangdang shares look attractive? (NYSE:DANG)

by Fred Mason

It’s been a rocky ride for shares in E-Commerce China Dangdang, Inc. (NYSE:DANG). Stock in the China-based online retailer debuted in December at $29.91 a share. Yesterday, those same shares closed at a new 52-week low of $15.56. That’s a drop of nearly 48 percent. Yet, I’m still optimistic about Dangdang’s future. Here are three reasons to consider buying into the so-called “Amazon of China” – even at today’s depressed prices:

1) Dangdang’s drubbing is temporary. One of the biggest reasons Dangdang’s shares have been falling comes down to simple supply and demand. Insiders who were previously locked out of selling their shares now have that right as the post-IPO lock-up expires. Just 19 million ADRs were trading last week. With the lock-up expiration, there are now more than 58 million ADRs on the market, per CNBC. Insiders who want to turn their paper holdings into currency now have that right, and it’s going to take the market a while to absorb that glut of supply.

2) Unrivaled sales growth. A recent report from SmarTrend named Dangdang the No. 1 Internet Retail stock in the world in terms of sales growth. Sales are expected to grow more than 113 percent from $375.9 million last year to $802.1 million in the next fiscal year. That puts DANG ahead of investor darlings like Netflix, Inc. (NASDAQ:NFLX), Priceline.com Inc. (NASDAQ:PCLN) and even Amazon.com, Inc. (NASDAQ:AMZN).

3) Setting the stage for even bigger growth. Dangdang’s aggressively expanding its product offerings, fulfillment facilities and accessibility as it faces fierce competition behind the Great Firewall. During an earnings call last month, Chairwoman Peggy Yu Yu made it clear the company’s not ready to start milking DANG for profits, but rather it’s fixating on setting the stage for future growth. We’ll “keep plowing whatever gross margin we make back into operations,” Yu Yu said.

Already, the scope of the site is expanding. Total orders surged 40.9 percent year-over-year last quarter, and the company’s total number of active customers grew by 42.3 percent. The site’s most impressive growth came from third-party merchants, with sales screaming up 242.9 percent. If those trends stay intact, Dangdang stands to make long-term investors a whole lot of yuan.

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Posted in Chinese stocks, Internet stocks, IPOs, tech stocks | No Comments »

Apr

2011

A Sina Weibo IPO could be in the works as China’s Twitter moves to Weibo.com

by Fred Mason

China’s popular Twitter-like site Weibo may have taken a step closer to an IPO yesterday by unmooring itself from Sina.com. No longer will users have to click or type their way to t.sina.com.cn. Instead, they can type in Weibo.com to access the microblogging site instantly, according to Penn Olson.

Back in February, I wrote a post titled Will we ever see a SINA Weibo IPO? I speculated then that SINA Corporation (NASDAQ:SINA) would be silly to spin off its fastest-growing business. I may have jumped the gun.

All systems seem to be pointing to a Weibo IPO sooner rather than later. First, there was a thinly-sourced report in March from China’s 21st Century Business Herald that claimed Sina was in talks with several investment banks as it mulled a Weibo IPO.

Now, there’s a move to separate the microblogging site from Sina.com by giving it its own domain. Perhaps it’s just a matter of time before we get our hands on an official S-1 filing.

For now, users will be able to use t.sina.com.cn AND weibo.com. Eventually the two sites will be merged, and traffic going to t.sina.com.cn will get re-directed to Weibo.com. The re-branding should help raise public consciousness for Weibo in China and abroad.

“We have successfully built Sina microblog Weibo into the largest and most influential social media platform in China, with user base increasing by more than 25 times in 2010,” Sina’s CEO Charles Chao said after the company’s Q4 earnings report last month.

The total number of Weibo users doubled to 100 million in the four months leading up to the report, and Sina’s in the process of deploying an advertising and a virtual goods marketplace on Weibo. While the microblogging service is yet to generate any revenue, analysts still believe Weibo could be valued at $3 billion or more.

And judging by the success of several recent tech IPOs out of China (including YOKU, DANG and QIHU), a Weibo IPO has the potential to turn into a public spectacle – especially if the site could beat Twitter, LinkedIn and Facebook onto stock exchanges.

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Posted in Chinese stocks, Internet stocks, IPOs, NASDAQ, private companies, trading stock, Uncategorized | 1 Comment »

Mar

2011

Amazon stock analysis: 5 reasons to buy and hold in 2011 (AMZN)

by Fred Mason

Since the start of 2011, shares in Amazon.com, Inc. (NASDAQ:AMZN) have fallen nearly 3 percent, but the company’s prospects still look strong thanks to a growing product pipeline. Here are five reasons to consider adding Amazon stock to your portfolio today:

1) Welcome to the Cloud Drive. Amazon has a history of forging into new tech niches long before they’re popular. The best example of this is Amazon Web Services (AWS): Amazon’s paid cloud computing service wherein other companies pay Amazon for server space and computing infrastructure. AWS has attracted some impressive clients since it launched in 2006 including Nasdaq (NASDAQ:NDAQ) and The New York Times Co. (NYSE:NYT). Now, Amazon’s looking to take its cloud services to the common man. This week the company launched Amazon Cloud Drive. With Cloud Drive, anyone who wants it can get 5 GB of online storage for free. They can then use that server space to store music, videos and files online and access them from Web-enabled devices anywhere. If users end up needing more than 5 GB of storage, they’ll have to open up their wallets to Amazon.

2) It’s “Appstore” not “App Store”. Much to the chagrin of Google Inc. (NASDAQ:GOOG), Amazon launched its Android Appstore last week. Now, consumers can un-tether themselves from Google’s official Android Market, and download free and paid apps directly from an online retailer they’re already familiar with. Amazon stands to get a 30 percent cut of every paid app they sell. For the record, Google’s not the only one upset about the launch of Amazon’s Appstore. Apple Inc. (NASDAQ:AAPL), which has the name “App Store” trademarked, sued Amazon over its use of the word “Appstore.” Apparently, there are times when branding trumps the threat of litigation.

3) One nation under Kindle. The success of Amazon’s e-reader, the Kindle, has been remarkable. Amazon hasn’t released exact sales figures on the device, but it already sells more e-books than it does traditional paperbacks. “Since the start of the year, Amazon has sold 115 Kindle books for every 100 paperbacks,” PCWorld reported in January. The good times are rolling. In February, AT&T Inc. (NYSE:ATT) announced it would start carrying Kindles, and now there’s speculation that a new Kindle in the works will run on Google’s open-source Android operating system. That would have the power to transform the Kindle from an e-reader into a full-blown tablet computer that just might compete with Apple’s iPad.

4) For your fulfillment. Amazon’s shares took a tumble after the company reported weak revenue growth in its Q4 earnings report on Jan. 28. The numbers weren’t all that surprising to analysts, though, as the quarter’s traditionally weak for the online retailer, and Amazon’s in the process of expanding its fulfillment centers. “1Q margins are likely to disappoint but reflect the higher spend on fulfillment centers/IT needed to extend AMZN’s above-industry growth well into the future,” Youssef H. Squali, an analyst at Jefferies & Co., wrote in a note to clients. “We recommend purchase of AMZN especially on any dip.” Bigger fulfillment centers means better margins moving ahead, and – after the costs are absorbed – that should boost the company’s bottom line.

5) Growth in the People’s Republic. Amazon’s quietly been building its brand in China since acquiring the Chinese online bookseller Joyo.com in 2004. In 2007, Amazon changed the site’s name to Amazon.cn, and it’s now the 74th most-visited site in China, according to Alexa.com. That puts it just one slot behind one of its main competitors: the online bookseller and retailer E-Commerce China Dangdang Inc. (NYSE:DANG), which recently IPO’d in the U.S. and operates Dangdang.com. Even if Amazon doesn’t ultimately overtake DangDang.com, there’s more than enough e-commerce growth in China to grow Amazon’s coffers for years to come.

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Posted in Internet stocks, NASDAQ, NYSE, retail stocks, tech stocks | 1 Comment »

Jan

2011

China’s best growth stocks through 2015

by Fred Mason

If you could invest in only one sector in China through 2015, it should be e-commerce. That’s the takeaway from a Credit Suisse forecast for what China will look like in 2015.

Credit Suisse expects China’s e-commerce sector to grow 100 percent a year over the next four years, and most of the companies that will benefit from that growth are still in private hands (check out my 2011 tech IPO calendar to see the Chinese tech stocks I’m following).

Still, if you’re on a quest for China’s best growth stocks through 2015, Credit Suisse’s report gives us clues on other sectors where we can also focus. Here’s a very rough guide to the growth Credit Suisse expects to see in China over the next four years. Percentage forecasts are approximate as I put them together based on charts at BusinessInsider.com:

E-commerce will rise by 400 percent.
Gas consumption will rise 200 percent.
Healthcare spending will by 150 percent.
Household wealth will rise by 100 percent.
Car sales will rise by 70 percent.
Tobacco sales will rise by 50 percent.
China’s electricity consumption will climb by 40 percent.
Oil consumption will rise by 20 percent.

My two picks right now? Amazon.com-style Dangdang (aka E-commerce China Dangdang, Inc., NYSE:DANG) and Chinese wealth-management company Noah Holdings Limited (AMEX:NOAH). Both sell at extraordinarily high multiples right now, but if Credit Suisse is on the money, you should pocket a nice return on both stocks in the coming years.

BE MY FRIEND? China’s Facebook: RenRen.com?	IPO CALENDAR The unofficial tech IPO calendar for 2011
INDIA OR BUST Best India stocks to buy in 2011	KISS OFF DangDang founder labels Morgan Stanley “motherf**kers”
NO BRICK, NO MORTAR China’s e-commerce market dominated by four companies	GOT ALIBABA? How to invest in the Alibaba Group IPO before the IPO

Tags: DANG, NOAH, Noah Holdings
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