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Why Shares of Are Surging Today

By Timothy Green – Aug 16, 2018 at 12:45PM

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The Chinese internet company beat expectations for its second-quarter results.

What happened

Shares of (WUBA) jumped on Thursday following the Chinese internet company's second-quarter report. Both revenue and earnings came in ahead of analyst expectations, and's revenue guidance for the third quarter topped the consensus estimate. The stock was up about 12.1% at 12:00 p.m. EDT.

So what reported second-quarter revenue of RMB3.43 billion, or $518.5 million. That's up 32.3% year over year in local currency, and about $46 million above the average analyst estimate. Membership revenue rose 21.1% to RMB1.17 billion, or $176.4 million, driven by an increase in subscription-based membership accounts. Across all the company's platforms, reached 2.93 million paying membership accounts in the second quarter.

A rising stock chart.

Image source: Getty Images.

Online marketing services revenue grew at a faster 42.3% rate, reaching RMB2.19 billion or $330.5 million. The company pointed to increasing adoption and effectiveness of its online marketing services as the main driver of the growth. Revenue from other sources, including e-commerce services, was minimal.

Non-GAAP earnings per ADS came in at $0.82, up 21.2% year over year in local currency and $0.14 higher than analysts were expecting. CEO Micael Yao went into more detail on some of the company's businesses:

We continued to be the biggest online recruitment platform in China as defined by revenues. Job category revenues continue to grow faster than most other major online recruitment companies in China. Revenue from our housing category remained resilient by delivering better-than-expected growth despite tightened government policies and low transaction volumes, especially in tier one and two cities.

Yao also gave an update on two small but promising new businesses:

Our two early stage businesses continue to generate record high traffic. Zhuan Zhuan, our C2C used goods transaction platform, has gained significant growth momentum from its branding campaign and Wechat Wallet access. 58 Town, a version of 58 specifically designed for rural areas, continues to expand the number of towns it covers and increase user engagement.

Now what expects to produce third-quarter revenue between RMB3.45 billion and RMB3.55 billion, up 26.7% to 30.4% in local currency. That range works out to $497.4 million to $512.0 million, above analyst expectations of $486.4 million.

Shares of have tumbled since peaking in early May. The stock sits right around $65 per share after Thursday's rally, still far below its 52-week high of nearly $90 per share. may need to string together a series of positive reports before the stock fully recovers.

Timothy Green 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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