Qunar lower on EPS miss; Ctrip battle yields heavy marketing spend

Though Qunar's (QUNR -3.3%) Q1 revenue beat consensus by $3.9M, soaring spending led EPS to miss by $0.15. R&D spend rose 116.8% Y/Y to $19.5M, product sourcing spend 358.2% to $6.3M, sales/marketing spend 158.8% to $21M, and G&A spend 293% to $10.8M.

Also: Gross margin fell 170 bps Q/Q and 300 bps Y/Y to 78.1%, and $10.8M was spent on marketing for Qunar's Baidu Zhixin unit. Both Qunar and rival Ctrip (CTRP +0.1%) are spending heavily on promotions

The good news: Qunar expects Q2 revenue to grow 90%-95% Y/Y, an acceleration from Q1's 83.6% clip.

Mobile revenue rose 114% Q/Q and 415% Y/Y to $17.1M, and made up 31.7% of total revenue. Total Web users +3% Q/Q and +24% Y/Y to 241M; total mobile users +12% Q/Q and +86% Y/Y to 60.3M. Estimated flight ticket volume +75% to 17.5M; estimated room-night volume +100.7% to 5.9M.

Pac Crest (Outperform) has lowered its PT by $6 to $34 due to spending worries, but remains bullish long-term.

Q1 results, PR

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