Barclays Reiterates Underweight Rating, $3.50 PT on Dangdang on Slower Growth

In a report published Friday, Barclays reiterated its Underweight rating and $3.50 price target on Dangdang DANG. Barclays noted, “While Dangdang managed to deliver a broadly inline result with 31% revenues growth and smaller net loss in 4Q12, it guided revenues to decelerate further to 20% y/y in 1Q13, partly due to the continued shift from self-procurement general merchandise business to a commission-based marketplace model. Management reassured that margins will rebound in 1Q13 after an 180bps decline sequentially in 4Q12 due to additional inventory provision and higher S&M cost. Shifting more transactions to a marketplace model will help to reduce losses and improve margins over time, but will come at the expense of slower top-line growth, which could then lead to less operating leverage and less scalability, in our view.” Dangdang closed on Thursday at $3.98.