- Citing margin concerns, Brean has downgraded SouFun (NYSE:SFUN -1.9%) to Hold a day after the company posted mixed Q1 results (EPS missed, revenue beat) and upped its full-year sales guidance by $35.1M to $808.3M (+15% Y/Y) yesterday morning.
- Responsible for the EPS miss: SouFun's gross margin fell to 64.7% from Q4's 80.8% and Q1 2014's 79.5%, and operating expenses rose 53.3% Y/Y to $71.8M (compares with 1.8% revenue growth). A 74.4% increase sales expenses to $48M drove the opex growth; G&A spend rose 23.2% to $23.8M.
- A 75.2% increase in SouFun's e-commerce services revenue to $51.5M helped Q1 revenue growth stay positive; rival Leju is also seeing strong e-commerce service growth. Marketing services (ad) revenue fell 13.5% $40.6M, and listing services revenue (hurt by discounts) fell 43.9% to $23.6M.
- SouFun is now down 5% since the Q1 report arrived.