Why E-House (China) Holdings Limited Popped Today

Is this meaningful or just another movement?

Mar 10, 2014 at 1:20PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese real estate services company E-House (China) Holdings Limited (NYSE:EJ) climbed as high as 12% today after Leju Holdings Limited, its wholly owned real estate listings subsidiary, signed a strategic deal with investment holding company Tencent Holdings to develop software and tools.

So what: The stock has rocketed over the past year on excitement over E-House's growth trajectory, and today's announcement only reinforces those good vibes. Specifically, Tencent's popular social networking platforms should offer Leju plenty of opportunity to expand its digital presence and, in turn, drive more transaction-based revenue.

Now what: E-House is naturally extra bullish on the agreement. "Developing and broadening Leju's mobile platform is an integral part of our growth strategy," said E-House CEO Xin Zhou. "Our cooperation with Tencent will extend our consumer reach through Tencent's powerful Weixin platform and other popular services, opening a key channel to disseminate real estate information and facilitate transactions. This marks a new milestone in our O2O e-commerce and mobile strategy development." Of course, with the stock now up more than 300% over the past year and sporting a 100-plus P/E, however, I'd wait for a much wider margin of safety before buying into that bull talk. 

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Brian Pacampara has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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