Morgan Stanley Declared Bitauto Holdings' Aggressive Monetization 'Unlikely Sustainable'; Downgrades To Neutral

Morgan Stanley's Amanda Chen downgraded Bitauto Hldg Ltd (ADR) BITA from Equal Weight to Underweight, while decreasing the price target from $28.00 to $20.00. The analyst rating change came in response to Bitauto's FY16Q1 results and guidance posted last Wednesday.

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Aggressive Monetization Not Sustainable

The analyst cited a slowdown in ad subscriptions, increasingly aggressive transaction monetization and less transparent disclosure concerns for the downgrade. Chen noted that year-over-year growth is extremely high, partly due to a bad FY15 year, but claimed it was unsustainable. "This aggressive monetization is unlikely to be sustainable in our view," the Morgan Stanley analyst said.

Chen estimated Bitauto having a $(201) EBITDA FY16 as a result of this overly aggressive monetization.