Youku -6.2%; Street worries about Baidu, ad budgets


Though Youku (YOKU -6.2%) beat Q1 EPS estimates, revenue of $112.7M missed a $114.2M consensus. Moreover, the company is guiding for Q2 revenue of RMB940M-RMB1B ($150.6M-$160.3M), below a $163.5M consensus.

Maxim Group (PT cut to $16) blames the growth slowdown on Youku's attempts to lower purchases of long-form content preferred by advertisers.

It believes a "weak content portfolio" led Youku to lose its Chinese online/mobile video leadership positions in Q1 to Baidu's (BIDU +1.7%) iQiyi and PPS platforms. Baidu has been busy promoting iQiyi/PPS throughout its Web empire.

"Top-line growth seems to be on a deceleration trend," writes Deutsche (PT cut to $21) in response to Youku's numbers. The firm and thinks the Q2 guidance points to weaker advertiser budget hikes.

Cost controls helped EPS beat estimates: Youku's content spend fell to 44% of revenue in Q1 from 49% a year ago. Bandwidth costs fell to 29% of revenue from 31%, and opex only grew 9% Y/Y (compares with 36% rev. growth).

On the CC (transcript), Youku mentioned mobile daily video views have topped 400M (they were only at 200M last June), and that mobile now accounts for 1/3 of revenue.

Q1 results, PR

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