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Why Bitauto Holdings Limited Stock Lost 25.5% in March

By Keith Noonan – Apr 13, 2018 at 11:49AM

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Is Bitauto stock in value-play territory after recent sell-offs?

What happened

Shares of Bitauto Holding Limited (BITA) lost 25.5% of their value in March, according to data provided by S&P Global Market Intelligence .

BITA Chart

BITA data by YCharts.

Shares sold off after Bitauto reported fourth-quarter earnings results, despite sales and earnings performance for the period coming in ahead of the market's expectations. A declining valuation for its Yixin subsidiary also pulled down the company's share price.

A cartoon hand holding a mobile phone up as if taking a picture of a red car

Image source: Getty Images.

So what

Bitauto's fourth-quarter sales climbed roughly 54% year over year to reach $413.5 million, beating the average analyst estimate of roughly $383 million in sales for the period. Adjusted earnings also slipped less than anticipated, dropping from $0.12 per share in the prior-year period to $0.11 when the average analyst estimate called for $0.10. However, management's guidance for first-quarter sales of between $302 million and $310 million fell short of the market's expectations, and shares dipped roughly 11% in the next day of trading. 

Yixin, the online auto financing platform in which Bitauto owns a 47% stake, saw its valuation stumble last month as well -- further dragging on the parent company's share price.

Now what

Despite Bitauto's revenue target missing Wall Street's expectations of roughly $337 million in sales for the current quarter, the company is still guiding for year-over-year sales growth between 37% and 41% for the period. Bitauto is valued at roughly 0.8 times this year's expected sales and 10.5 times expected earnings. With China's middle class expanding at a rapid clip and lots of momentum in the e-commerce space, those metrics suggest the stock could be an appealing value play for risk-tolerant investors. 

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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