Why Is SouFun (SFUN) Down 21.5% Since Last Earnings Report?

It has been about a month since the last earnings report for SouFun (SFUN). Shares have lost about 21.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is SouFun due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Fang Holdings Misses Q3 Earnings, Revenue Estimates

Fang Holdings reported dismal third-quarter 2018 results, with the top and the bottom line missing the Zacks Consensus Estimate.

Earnings per share of 3 cents missed the consensus mark by 3 cents and declined 33.3% year over year.

Total revenues of $83.6 million missed the consensus mark by roughly $24 million and declined 25.5% year over year. The decline was primarily due to weakness across listing and e-commerce services.

Fang’s top line has been weak in recent times particularly because of a decline in its e-commerce services revenues, which have been affected by the company’s reversion to a technology-driven platform model.

Revenues by Segment

Listing services segment revenues declined 38% year over year to $29.2 million. Decreasing number of paying members resulted in the downfall. The segment accounted for 35% of total revenues.

Marketing services segment revenues decreased 4.1% year over year to $35.7 million. The segment contributed 43% to total revenues.

E-commerce services segment revenues declined 77.7% year over year to $3.7 million. Segment revenues were hurt by the company’s transition to a technology-driven open platform model. The segment accounted for 4% of total revenues.

Financial services segment revenues increased 34.6% year over year to $4.7 million. Rising demand for the company’s financial products drove segment revenues. The segment contributed 6% to total revenues.

Revenues from value-added services increased 33.3% year over year to $10.3 million, owing to growing demand for the company’s database and research services. The segment accounted for 12% of total revenues.

Profitability Performance

Gross profit decreased 14.2% from the year-ago quarter to $65.8 million. Adjusted EBITDA came in at $25.7 million compared with $24.8 million in the prior-year quarter. Operating income was $15.3 million, down 16.8% from the year-ago quarter due to reduction in revenue from listing services.

Operating expenses declined 13.4% year over year to $50.6 million. Selling expenses of $21 million were up 24.3% from the year-ago quarter due to increase in advertising and promotional expenses. General and administrative expenses were $29.8 million, down 28.5% on a year over year basis mainly due to effective cost control methods and decline in bad debt expenses.

Balance Sheet and Cash Flow

Fang Holdings had cash and cash equivalents, restricted cash (current and non-current) and short-term investments of $439.9 million compared with $481.8 million at the end of the prior quarter. Long-term loan was $124.4 million at the end of the quarter. Net cash generated from operating activities was $33.5 million in the reported quarter.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

Currently, SouFun has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending

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