Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Chinese social networking platform Renren
With that in mind, let's take a closer look at Renren's business and see what CAPS investors are saying about the stock right now.
Renren facts
| Headquarters (Founded) | Beijing, China (2002) |
| Market Cap | $4.99 billion |
| Industry | Internet information providers |
| Trailing-12-Month Revenue | $76.54 million |
| Management |
Founder/Chairman/CEO Joseph Chen CFO Hui Huang |
| Trailing-12-Month Return on Equity | (21.5%) |
| Cash/Debt | $198.4 million / $0 |
| Competitors |
Baidu.com
Sina
Sohu.com |
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 47% of the 75 members who have rated Renren believe the stock will underperform the S&P 500 going forward. These bears include fellow Fool Rich Duprey (TMFCop) and TSIF, both of whom are ranked in the top 15% of our community.
Just last week, Rich nicely summed up the Renren bear case:
China doesn't allow its people to express themselves, so what are you going to do on Renren, mouth the party line? Zzzzzz! This will fail because there will be no point in using the service.
Currently, Renren even sports a sky-high price-to-cash flow ratio of 178.6. That represents a clear premium to growing social networking threats like Baidu (61.7), Sina (74.6), and Sohu (10.3).
CAPS All-Star TSIF expands on the Renren underperform argument:
Social media stocks have had some serious resilance and actual valuation does not seem as important to investors as getting in early on a potential "FACEBOOK" blockbuster. ... [W]hile Renren seemed to have a successful IPO with a decent upside after the release, it has been floundering as real investors wonder about several very serious and underriding issues.
1. While Renren may have a leg up on competitors such as Facebook because it is China based, it is still under serious scrutiny and can potentially be regulated and/or shutdown as easily as its Facebook and Google US based peers.
2. Insiders are offering 10 Millon of the IPO ADR shares. Why? Revenue growth already leveling off the last year and lost $64 Million in 2010. ...
3. Social networking in China is under intense competition. (KaiYin, Qzone, 51.com etc). Renren is mostly college based students and retention may be difficult.
What do you think about Renren, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
