E-Commerce China Dangdang (DANG) Stock Retreating on Earnings Miss

NEW YORK (TheStreet) -- Shares of E-Commerce China Dangdang Inc. (DANG) are falling by 13.56% to $8.86 on heavy volume in early afternoon trading on Thursday, after the China-based business to consumer e-commerce company reported an earnings loss for the 2015 first quarter.

For the most recent quarter the company, more commonly known as Dangdang, posted a net loss of 12 cents per ADS, while analysts were expecting a net income of 4 cents per ADS.

Total revenue for the first quarter of 2015 grew by 27.7% to $357.7 million, just above the $355.78 million analysts had forecast.

Despite the quarterly loss Dangdang is pleased with its financial results for the quarter, having achieved what it says is "strong top line growth."

"Although we posted a loss for the quarter, it was primarily the result of marketing and technology initiatives and expenditures related to e-books, mobile and content that we believe set the stage for the future healthy development of our business," Peggy Yu Yu, executive chairwoman of Dangdang said in a statement.

So far today, 3.23 million shares of Dangdang have exchanged hands as compared to its average daily volume of 1.03 million shares.

Separately, TheStreet Ratings team rates E-COMMERCE CH DANGDANG -ADR as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate E-COMMERCE CH DANGDANG -ADR (DANG) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, robust revenue growth and reasonable valuation levels. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet & Catalog Retail industry. The net income increased by 70.3% when compared to the same quarter one year prior, rising from $3.08 million to $5.24 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 19.0%. Since the same quarter one year prior, revenues rose by 18.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • E-COMMERCE CH DANGDANG -ADR reported significant earnings per share improvement 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, E-COMMERCE CH DANGDANG -ADR turned its bottom line around by earning $0.17 versus -$0.30 in the prior year. For the next year, the market is expecting a contraction of 3.5% in earnings ($0.16 versus $0.17).
  • The gross profit margin for E-COMMERCE CH DANGDANG -ADR is rather low; currently it is at 17.67%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 1.30% is above that of the industry average.
  • You can view the full analysis from the report here: DANG Ratings Report

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