Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Bitauto Holdings Stock Is Trading Higher Today

By Jon Quast – Jun 12, 2020 at 10:51AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Hint: It's not simply going up with the market.

What happened

Shares of Bitauto Holdings (BITA) are trading higher on Friday, and it's not just because the rest of the market is higher as well. Rather, the company reported results for the first quarter of 2020 and announced it has entered an agreement to go private. 

As of 10:30 a.m. EDT, Bitauto stock was 9% higher. With today's gains, the stock now trades higher than where it started 2020. It was down over 30% earlier in the year.

BITA Chart

BITA data by YCharts

So what

Bitauto is a Chinese company in the auto sector that provides internet content and marketing services and enables online transactions. For obvious reasons, cars didn't sell well during the coronavirus outbreak in China. Bitauto's first-quarter revenue was down 36% year over year in local currency. Its advertising and subscriptions business held up relatively well. But transaction-service revenue plummeted 48% from the first quarter of last year.

This unexpected revenue plunge led to a massive net loss for Bitauto. In Q1, it lost $181 million according to generally accepted accounting principles (GAAP). The company's non-GAAP loss was $147 million. However, the company's cost of revenue actually improved during the quarter. This suggests the bulk of Q1's problems were due to the external coronavirus event, not a broken business model.

These mostly discouraging results aren't likely causing Bitauto stock to rise today. In a separate press release, the company announced a definitive agreement that will take the company private. With several parties involved, the transaction is complex. But the important takeaway for investors is Bitauto's days as a public company are numbered.

A man draws an upward arrow with his finger on a transparent touchscreen.

Image source: Getty Images.

Now what

Bitauto's go-private deal is all-cash, entitling shareholders to a payment of $16 per share. Considering the stock now trades close to that level, it's probably in shareholders' best interest to sell the stock and invest that money elsewhere. The upside is now limited for Bitauto, but growth stock opportunities abound on Wall Street.

Jon Quast 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bitauto Holdings Stock Quote
Bitauto Holdings
BITA

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.