Vipshop, Renren Search for Profits 唯品会与人人网业绩迥异
Two very different stories are emerging from the latest results of discount online retailer Vipshop (NYSE: VIPS) and social networking site Renren (NYSE: RENN), which are both trying desperately to escape from the loss column amid growing investor impatience with money-losing Chinese web firms. On the one hand, Vipshop’s latest results show it is likely to emerge into the profit column in the final quarter of this year, prompting cheers from investors. But Renren appears to be moving in the opposite direction, reporting a widening loss as China’s ad market worsens. Meantime, new details are also emerging on the latest fund-raising by e-commerce giant Jingdong Mall, which also points to growing investor impatience with money losing web firms.
Let’s start off with Vipshop, whose shares have more than doubled since late August after a disastrous IPO earlier this year, as investors realized the company was likely to join the rare elite of Chinese e-commerce firms that were actually profitable. It’s latest results continued to point in that direction, with Vipshop’s third quarter revenue up nearly 200 percent to $160 million. (results announcement) It’s net loss also dropped sharply to $1.5 million, versus $5.8 million in the previous quarter and $17.5 million a year earlier.
The company forecast slowing but still triple-digit growth in the fourth quarter, with revenue forecast to jump about 125 percent to $235-$240 million. All signals indicate it will report its first-ever profit in the fourth quarter, and investors rewarded the company by bidding up Vipshop shares nearly 9 percent in after-hours trading after the results came out.
Meantime, Renren’s results painted a very different picture, as the company’s net loss ballooned to $15.4 million from $1.2 million a year earlier. (results announcement) The company’s revenue continued to grow at a respectable 47 percent to $50 million, with its fast-growing online game business now accounting for about half of all revenue even as advertising revenue dropped.
The revenue figures were somewhat disappointing, since most investors who originally brought Renren shares thought they were buying into a social networking site like US giant Facebook (Nasdaq: FB). Instead, they are quickly discovering they purchased a company in the online game space, which is already quite crowded and competitive.
Renren shares were unchanged in after hours trade after the results came out, reflecting the fact that investors have largely lost interest in the company. It’s shares have lost more than half of their value since May, and could fall even further still as investors awake to the fact that profitability may not be coming anytime soon.
Finally, let’s look at Jingdong Mall, also known as 360Buy, which has just raised a reported $400 million in much-needed new funding. (previous post) In new reports of this fund raising, we are now learning that the new investors received convertible bonds in exchange for their funds, rather than an actual equity stake. (Chinese article) That means that these new investors are hedging their bets, preferring to take bonds that can be repaid at their face value with the option to also buy stock in the company its situation ever improves. That’s hardly a vote of confidence in the future of Jingdong Mall, reflecting the tough conditions in China’s cut-throat e-commerce market.
Bottom line: Vipshop looks likely to become one of China’s few profitable e-commerce companies next quarter, while Renren is fast losing investor appeal as its loses widen.
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