Market Overview

Brean Sets Buy Rating, $65 Target On

Brean Sets Buy Rating, $65 Target On

Brean Capital has initiated coverage of Inc (ADR) (NYSE: WUBA) with a Buy rating and $65 target price, citing strong growth with operating leverage in the coming years.

"We believe WUBA offers attractive investment opportunities for investors to participate in the fast growth of a full-fledged local service platform in the making," analyst Fawne Jiang wrote in a note.

Jiang said the Beijing, China-based online market place is poised to build a differentiated ad platform focusing on the under-served SME merchants through both strong organically and strategic acquisitions.

The analyst said although the company is making losses, the path for strong operating leverage in the coming quarters/year is clear with increasing consolidation of market share and spin-off of investment-heavy and loss making assets.

For the first quarter, the company's non-GAAP EPS loss was $0.36, better than consensus' estimate of a $0.58 loss, driven largely by the higher revenue and lower costs across the board.

The company provided second quarter revenue guidance in the range of $296 million - $303 million, up 98 percent to 103 percent YoY, and above consensus expectations of $289 million.

"We believe upbeat guidance is driven by continued solid growth on both membership and online marketing services, particularly with consolidated market share and the increasing upselling opportunities," Jiang highlighted.

Looking ahead, Jiang expects to see increasing revenue mix shift to online marketing services with an improving trend in upselling rate. Further, the company would benefit from incremental revenue opportunities from Ganji and Anjuke given their lower adoption of online marketing services.

For 2016, the analyst expects a loss of $0.15 a share and revenue of $1.279 billion. Street, on average, expects a loss of $0.46 and revenue of $1.23 billion.

At the time of writing, ADRs of fell 1.50 percent to $52.70.

Posted-In: Fawne JiangAnalyst Color News Price Target Initiation Analyst Ratings Best of Benzinga


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