Ctrip, Soufun Sputter, Canadian Solar Picks Up In Q1
Three industry leaders have just announced their latest quarterly results, and the numbers look downbeat for online travel giant Ctrip (Nasdaq: CTRP) and Internet real estate services firm Soufun (NYSE: SFUN). Meantime, some limited results from solar panel maker Canadian Solar (Nasdaq: CSIQ) look more positive, showing that both sales and prices are picking up more quickly than expected amid a spotty sector recovery from a 2 year downturn.
Perhaps the best place to start this results round-up is with a look at how shares of all 3 companies reacted to their latest quarterly reports. It’s worth noting first that shares of US-listed China tech companies have all come under pressure over the last 2 months, in a correction after huge run-ups last year. Beijing is making the situation worse with a series of recent crackdowns against Internet firms in a wide range of areas.
Among this trio of leaders, Ctrip fared the best with a 3 percent rise in after-hours trade after it announced its results. It’s worth noting that the company’s shares were down nearly 6 percent in regular trade before its announcement, indicating investors were preparing for bad news. Meantime, Canadian Solar shares managed a modest 1 percent gain after its upbeat announcement. Soufun spooked investors with its outlook, sparking a 9 percent sell-off of its shares.
Let’s start with Soufun, which is getting hit hard by a steady stream of recent headlines saying that China’s property bubble may finally be starting to burst after years of breakneck growth. The company’s first-quarter revenue and profit both looked quite respectable, up 33 percent and 46 percent, respectively, to $121 million and $42 million. (company announcement)
But investors were spooked by the company’s forecast that revenue growth for all 2014 would slow to about 24 percent. Frankly speaking, that kind of slowdown doesn’t look so bad if the long-awaited real estate correction finally does come later this year. If the downturn really does come, then perhaps Soufun will have to lower its 2014 revenue outlook further still. That kind of thinking may be partly behind the stock’s recent plunge that has seen it lose nearly half its value over the last 2 months.
From Soufun let’s look at Ctrip, whose shares have suffered far less than many of its Internet peers and are down a modest 16 percent over the last 2 months. That’s probably because the company operates in the travel space that doesn’t attract as much attention from Beijing regulators compared with the more sensitive media sector. Ctrip shares have also gotten a boost from a steady stream of reports that say the company will lead a new round of consolidation in the online travel space.
Ctrip’s top line doesn’t look too bad, with revenue up 36 percent to $254 million, and forecast to grow at a similar rate in the current quarter. (company announcement). But the bottom line wasn’t so pretty, with profits falling 25 percent to $19 million. Ctrip went through a period of similar profit declines during some intense price wars in 2012, but had returned to profit growth in the last few quarters. So this profit decline appears to show that competition may be heating up again, and we could see more similar declines in the next few quarters.
Finally there’s Canadian Solar, which is emerging as one of China’s best-run solar panel makers as the industry emerges from its prolonged downturn. The company has only released some limited early results, which show that shipments and revenue were both ahead of its previous guidance. (company announcement) Shipments beat the company’s previous guidance by about 3 percent, while revenue beat guidance by a larger 10 percent.
That discrepancy means the prices Canadian Solar charges for its panels are rising more quickly than it previously thought, which should help its margins and profits for the rest of the year. The company’s shares soared last year as it became the first major player to return to profitability, but have slumped around 40 percent over the last 2 months. With trends improving, perhaps the stock could be due for some modest upside in the months ahead.
Bottom line: Ctrip’s and Soufun’s profits will come under pressure in the months ahead, while Canadian Solar’s performance could improve as the solar sector recovery gains strength.
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