Renren (RENN) will report its fourth quarter earnings results on March 11, 2013. Following the results, a conference call will take place to discuss the financial results at 9:00 PM (Beijing Time) and 8:00 AM (U.S Eastern Time) on March 11, 2013.
Renren Inc. operates a social networking Internet platform (renren.com) in China. Some of its other platforms include game.renren.com, an online games center; nuomi.com, a social commerce Website; and 56.com, a user generated content video sharing Website.
After topping analyst expectations last quarter with record revenue of $50.4 million, will Renren be able to keep up the earnings momentum? Let's take a look at the numbers.
|Wall Street Expects|
2013 Q1 Revenue Guidance:
So how has Renren performed over the last year with its earnings reports? Let's take a look at the table below and find out.
*Data taken from Yahoo!Finance
From Renren's earnings history we can see that it has had two surprises and two disappointments according to analyst estimates over the year. We can also see that Renren's earnings per share [EPS] has been going in the wrong direction.
Looking over the Alexa rankings (a provider of free, global web metrics) we are able to see the trends of what is taking place with Renren. The first chart shows us how much time users are spending on Renren.com, while the second chart shows us Renren's overall traffic rank in the world.
As we can see from the chart, the time that users are spending on renren.com has stayed within range-- at around eight to ten minutes on the site. When we compare that to social media giant Facebook (FB), we see that users are spending around 25 minutes on its website.
The traffic chart shows the current rank of popularity of the websites all over the world. As we can see, Renren currently stands at 140. Because Renren makes most of its money from advertisers, the stats are a good indication of what advertisers will likely be willing to pay to advertise on Renren's website. Baidu (BIDU), for example is ranked number one in China and 5th in the entire world. Advertisers will have to pay more on sites like that than they will for sites like Renren.
Chinese New Year
Looking over the charts you probably noticed right off the bat the steep drop-off from February. So what caused this and should investors be worried? First off, investors should not be worried because that is the time that China celebrates the Chinese New Year or Spring Festival. This celebration is China's longest festival, which is why February has always been a slowdown period for most-- if not all-- Chinese companies like Baidu, Sina Corp. (SINA), Sohu, Inc. (SOHU) and Dangdang (DANG) etc.
Real Name Users
Renren had 172 million activated users in the third quarter representing a 10 million increase in activated users from the second quarter of 2012. Based on the trends over the last couple of earnings reports, Renren should expect to post another 10-12 million gain in activated users. This would mean that Renren should have between 182-184 million activated users at the end of the fourth quarter.
New Share Repurchase Program
Renren authorized the renewal of the Company's share repurchase program for another 12 months from January 1, 2013 to December 31, 2013. During this 12-month period, Renren is authorized, but not obligated, to repurchase up to $48.2 million of its American Depositary Shares ("ADS"), representing the remaining balance of its previously announced share repurchase plan that ended in September last year. Under the original share repurchase program of $150 million, the Company had repurchased 24.2 million ADS in total for an aggregate consideration of $101.8 million.
Earnings can definitely be a nerve racking time for investors, as shocking results (good or bad) can send shares flying in one direction or another. However, I feel that shares of Renren-- which closed at $3.07 Friday-- are a good pick up at this point considering its cash per share stands at $2.37. This means that nearly 78% of Renren's stock value can be explained by its cash on hand. Meanwhile its users, trademarks, contracts and other assets are currently being valued at less than 22% of the current stock price. With Facebook not allowed in China and Renren's gaming business growing at a record pace, I feel investors should feel confident heading into earnings on Monday morning.
Analysts' Recommendations: According to S&P Capital IQ, the consensus on Renren is a hold, with an average price target of $4.40. This would reflect almost a 35% increase from Renren's current price of $3.07.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in RENN over the next 72 hours.