Renren First Financial Report Since IPO – Loss Narrow

Renren‘s share price has been tumbling since its mega size IPO.   Investors worried if they have been paying too much for the so-called Chinese Facebook.  It went as low as US$6.55 last Friday, more than 50% off its IPO price of US14 a share.

But every cloud has a silver lining.  Renren released its first financial report after its IPO.  It significantly narrowed its loss: 78.5% decrease from a year earlier.  And it looks like the so-called Chinese Facebook might be break-even soon.  The news boost its share price.  It closed at US%7.6 on Monday, up 8%.

One thing Renren worried investors the most is Renren’s financial.  After all, last year it made a loss of US$64.2 million and its revenue was a mere US$76.5 million.  That means it lost 84 cents for every dollar it made. The company’s net loss for Q1 of 2011 was US$2.6 million, compared with US$12.1 million in the same period last year.  And its revenue increased 46.6% to US$20.6 million, of which, advertising more than double to US$8.1 million.  And  IVAS revenues (mostly game) was up 24.7% to US$12.4 million.

If the trend continues, it expects revenue to increase to US$29 to US$30 million next quarter, representing 46% to 51% year-on-year growth. If Renren can turn profitable soon, the company might not be overpriced any more.   Actually, it might start to look like a good investment.  Deutsche Bank analyst, Alan Hellawell, gives Renren a 12-month target price of US$8.42 a share.

Other points worth noticing:

– Renren has targeted 35% user base growth per year

– The number of activated users increased from approximately 91 million as of March 31, 2010 to approximately 117 million as of March 31, 2011, and further to approximately 122 million as of May 31, 2011.

– The monthly unique log-in users increased from approximately 23 million in March 2010 to approximately 31 million in March 2011, and to approximately 33 million in May 2011.

– Within the IVAS revenues, its social commerce services (Nuomi.com), which was launched in June 2010, had US$0.9 million of net revenues for the first quarter of 2011.

– Alan Hellawell, estimates that 30% of Renren’s traffic is mobile, and that the number of mobile users tripled since Jan 2011.

– Alan also views Renren as a clear beneficiary of the 3G & smartphone age in China, and expect location-based and mobile commerce user behavior to broaden over time.

– He also estimates that college students represent 35-40% of Renren users. Their daily activity is significant: roughly 50% of these students log in on a daily basis.