58.com Inc (ADR) (NASDAQ:WUBA) is a Chinese online company that doesn’t get the exposure its high profile contemporaries get. While most U.S. investors who are interested in China have heard of Alibaba Group Holding Ltd (NYSE:BABA), Weibo Corp (ADR) (NASDAQ:WB) or Tencent Holdings Ltd (OTCMKTS:TCEHY), WUBA isn’t always on the radar.
And that’s a good thing, especially now.
I say that because there are two reasons WUBA stock is a great choice if you’re interested in finding a Chinese tech stock right now.
Two Reasons WUMA Stock Should Be on Your Radar
Basically, 58.com is the Craigslist of China. But that needs to be put into some perspective. Craigslist is a money maker in the U.S., so you can imagine the market potential in China.
China has 15 cities with populations over 10 million people. The U.S. doesn’t have a single one. China has 160 cities with a population of over 1 million people. The U.S. has 10.
58.com services are available in more than 500 cities and towns in China, and that list continues to grow. Plus, 58.com also sells advertising and marketing services on its platforms, which is another source of revenue.
Because WUBA has been overshadowed by other Chinese online businesses, this story isn’t common knowledge. Once WUBA gets more press, its popularity as an investment will grow significantly.
The second reason WUBA stock is a good choice right now is, it’s unlikely any trade war will dent the online community. And because all its business is inside of China, there are no international issues to deal with.
Whatever the trade fight does won’t hurt WUBA’s business in any way and such problems may actually help it as scarcity for some goods may mean third-party sales will become more valued.
Early this month, WUBA reported its Q4 earnings and as usual, they were beyond analysts’ expectations. Revenue was up 32%. Gross margins increased. Free cash flow was up 63% and membership revenue was up 28%.
Membership revenue and online marketing services revenue (up 38%) are generated by businesses that are selling on WUBA’s various sites or using WUBA services like real-time bidding or priority listing.
With all this bullish news, the stock sold off about 3.5% when it released the numbers because its outlook for Q1 was lower than analysts’ expectations. It anticipates revenue in the $361-377 million range and analysts projected $378 million. That’s a great opportunity to buy on the cheap.
What’s more, now that WUBA has lowered expectations, if it ends up hitting that number, you can be sure that the upside will be a lot more than that 3.5% ding.
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Source: Investor Place