In addition to beating Q2 revenue estimates (while missing on EPS), Qunar (NASDAQ:QUNR) is guiding for 90%-95% Y/Y Q3 revenue growth; the consensus is for revenue to grow 83% to $72M.
Mobile revenue rose 511.8% Y/Y in Q2 to $22.9M (35.5% of revenue), fueling the revenue beat. Flight revenue +143.3% to $45M; hotel revenue +79.5% to $11.5M. Flight ticket volume +66.1%, and revenue/ticket +46.4%. Hotel room night volume +105.2%, but revenue per room night -12.5%.
Gross margin fell to 73.6% from 78.1% in Q1 and 78.2% a year ago (hurt EPS). Qunar notes higher payment-processing fees pressured its gross profit.
Spending was heavy: R&D spend +181.6% Y/Y to $29.3M, sales/marketing +212.4% to $34.7M, product sourcing spend +416.1% to $10.9M, G&A spend +432.9% to $18M. Online marketing spend +120.5% Q/Q to $23.8M.
If history is any guide, Ctrip (NASDAQ:CTRP) and/or eLong (NASDAQ:LONG) could follow Qunar higher.
Priceline (NASDAQ:PCLN) is investing $500M in Chinese online travel leader Ctrip (NASDAQ:CTRP) through a convertible bond, and has been granted permission to buy Ctrip shares in the open market over the next 12 months. Between the bond and the share purchases, Priceline can hold up to a 10% stake.
The companies are also expanding their existing partnership (formed in 2012). Priceline will provide Ctrip customers access to its 500K+ non-Chinese accommodations, and Ctrip will provide Priceline customers access to its 100K+ Greater China accommodations.
In addition, Ctrip will provide access to Priceline's rentalcars.com and OpenTable inventory, and Priceline will promote Ctrip's air/attraction ticketing services to its customers. Priceline will have the right to nominate an observer to Ctrip's board.
The alliance poses a fresh challenge to Expedia-controlled eLong (NASDAQ:LONG) and Baidu-controlled Qunar (NASDAQ:QUNR). Expedia recently shot down a rumor stating Ctrip was looking to acquire Expedia's eLong stake.
Citing concerns about air ticket commission cuts, Stifel's George Askew has downgraded Ctrip (CTRP) to Hold.
Askew notes Air China is lowering its commission on ticket bookings to 2% from 3%, and considers it "likely that other Chinese airlines will follow Air China’s example, particularly the number one and two players China Southern and China Eastern."
He's assuming a 0.5% net reduction in Ctrip's air ticket commission, and has respectively slashed his 2014 revenue and earnings estimates by 2% and 3%.
Transportation ticketing revenue accounted for 39% of Ctrip's Q1 sales, and was up 43% Y/Y.
Qunar (QUNR) is following Ctrip lower. Peer eLong (LONG) might also get hit.
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.
After pricing its 8M-share IPO at $9, Tuniu (TOUR) opened at $9 but has since risen 12% to $10.08.
The Chinese online packaged tour seller has a market cap of $474M, or 1.5x 2013 sales. It sold 7.38M new shares, and 620K on behalf of existing holders. Tuniu had 2013 revenue of $324.2M (+75% Y/Y), and a net loss of $13.2M.
Chinese online travel peers Ctrip (CTRP +4.9%), Qunar (QUNR +1.8%), and eLong (LONG +1.5%) are all trading higher.
Sohu (SOHU -4.8%) missed Q1 estimates and provided light Q2 guidance. Meanwhile, as part of a recent crackdown, the Chinese government has pulled The Big Bang Theory and other popular U.S. shows from sites such as Sohu.com, Youku.com (YOKU -4.4%), Baidu's (BIDU -5%) iQiyi, and Tencent Video (TCEHY -2.8%). Time observes The Big Bang Theory has produced 1.3B video views since launching on Sohu TV in '09.
The deals are the latest in a long line of investments and partnerships struck by Alibaba, Tencent, and Baidu, as each firm tries to build a Web/mobile empire covering over a dozen valuable markets.
Is Qihoo (QIHU -0.8%) next in line to make a deal? With a $21.6B market cap, the security app/browser/search provider and Baidu rival is the biggest Chinese Internet company to remain independent of the big-3. Qihoo was reported in January to be talking with Alibaba.
Bloomberg reports leading Chinese travel sites Ctrip (CTRP +5.4%) and Qunar (QUNR +5.4%) are "discussing a range of possibilities, from a full-blown merger to a partnership."
Sources caution the talks are at an early stage, and that ownership structure and financing haven't yet been agreed upon.
With combined 2013 sales of more than $1B, a Ctrip-Qunar merger would create a Chinese online/mobile travel powerhouse ... provided regulators don't object. The companies have been aggressively battling for mobile customers, sacrificing margins in the process.
Ctrip and Qunar are both rallying. Rival eLong (LONG +1.9%) is also higher amid positive early trading for recently-pressured Chinese Internet stocks.
Aided by King's poor debut and general momentum stock weakness, U.S. and Chinese Internet stocks have fallen hard for the second time this week.
In addition to King rival Zynga and newly-minted VR headset maker Facebook, Twitter (TWTR -7.1%) is among the leading U.S. decliners. Exactly 3 months after reaching a peak of $74.73, shares have fallen below their post-IPO opening price of $45.10. They remain well above their $26 IPO price.
Other U.S. decliners: P -5.2%. Z -6.2%. TRLA -7%. GSVC -4.8%. SVVC -4.1%.
Chinese Internet and solar names, many of them among the standouts of the 2013/2014 tech rally, are heading into the close with steep losses after the Chinese government reported exports fell 18.1% Y/Y in February (much worse than expected).
Qunar Cayman Islands Ltd is engaged in the operation of an online travel commerce platform with the provision of pay-for-performance services, display advertising services and other services in the People's Republic of China (PRC).