I spoke too soon.
I was criticizing Pacific Crest for issuing a price target of $13 on Wi-Fi network operator Boingo Wireless
As a busted IPO, $13 represents a healthy 70% premium to where the stock closed last week. It would be a great targeted return. However, it seems hypocritical to sell investors a debutante at $13.50, only to come back a month later and argue that it may only be worth $13 -- and that's if things pan out.
Well, Pacific Crest is at the center of another ugly price target.
After helping take Renren
One can rightfully argue that underwriters didn't create the mania. Renren was originally expected to price its offering between $9 and $11. It was investor demand that escalated the final price tag to $14. It was the free markets that floated the stock up to an intraday high of $24 as individual investors poured in the buy orders.
However, analysts are also the ones who win new business on the merits of their earlier successes. If you get involved with too many busted IPOs, investors will eventually notice.
Wilson sees Renren earning $0.08 a share this year on $120 million, with profits doubling to $0.16 a share on $200 million in revenue next year.
Backed by 33 million active monthly users who spend a lot of time on the sticky site, Renren's not going away anytime soon.
This doesn't make it China's Facebook. Renren lacks that kind of market penetration. It's also facing off against the larger Tencent and SINA
Facebook has also not decided who it will partner with for its anticipated entry into China. Renren would be off to the races if Facebook teams up with the site, but the more likely partner is Baidu
Renren will still have to sway skeptics concerned with its odd corporate structure, given the recent trust issues between stateside investors and Chinese growth stocks. Investors who snap up Renren, white-collared connector LinkedIn
This doesn't mean Renren isn't attractive at the right price. Unfortunately, I think $14 and even $11 may be too rich until Renren proves that it really is the Facebook of China and not its MySpace or Friendster.
Are you buying into Renren? Share your thoughts in the comment box below.