Deutsche Bank downgraded the Chinese real estate listing site to "hold" from "buy," lowering its price target to $11. Analyst Vivian Hao wrote that a recent 40% price cut on nationwide subscription fees to secondary listing customers is a "major downside surprise for the market."
"We believe SouFun is facing deteriorating economics around its SouFun card business such that take-rate with developers will continue to decline," Hao wrote. "We attribute this to: 1) aggressive effective take-rate offered by competitor in tier-1 cities, and 2) land grabbing strategy in lower-tier cities along with deepening geographical penetration."
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Separately, TheStreet Ratings team rates SOUFUN HLDGS LTD as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate SOUFUN HLDGS LTD (SFUN) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 21.2%. Since the same quarter one year prior, revenues rose by 33.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- Powered by its strong earnings growth of 41.17% and other important driving factors, this stock has surged by 108.50% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SFUN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- SOUFUN HLDGS LTD has improved earnings per share by 41.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SOUFUN HLDGS LTD increased its bottom line by earning $0.71 versus $0.37 in the prior year. This year, the market expects an improvement in earnings ($0.82 versus $0.71).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Internet Software & Services industry average. The net income increased by 46.1% when compared to the same quarter one year prior, rising from $28.41 million to $41.52 million.
- The gross profit margin for SOUFUN HLDGS LTD is currently very high, coming in at 81.78%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 34.25% significantly outperformed against the industry average.
- You can view the full analysis from the report here: SFUN Ratings Report