Please ensure Javascript is enabled for purposes of website accessibility

Why Cheetah Mobile Stock Briefly Sprinted Higher

By Evan Niu, CFA - Aug 18, 2020 at 1:26PM

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

The Chinese mobile tech specialist took a big hit in the second quarter after getting suspended by Google.

What happened

Shares of Cheetah Mobile (CMCM -2.29%) briefly sprinted higher this morning, up as much as 9% in early trading, after the company reported second-quarter earnings. The stock has since given back most of those gains and is up 2% as of 12:20 p.m. EDT.

So what

Revenue in the second quarter declined by 59% to 394.2 million yuan ($55.8 million), which translated into adjusted net income of 243.9 million yuan ($34.5 million), or 1.74 yuan ($0.25) per American depositary share (ADS).

Woman smiling at her smartphone with a teacup and saucer in the foreground

Image source: Getty Images.

The Chinese mobile tech company said that its advertising revenue was significantly impacted by the COVID-19 pandemic, as many large advertising customers are located in big cities like Beijing. Cheetah also acknowledged that its mobile entertainment business took a major hit after Alphabet's Google suspended its apps and kicked the company off its advertising platforms in February.

"Our second quarter revenue came in ahead of management's expectations despite the unfavorable macro environment caused by the outbreak of COVID-19," CEO Sheng Fu said in a statement. "We have shifted our business focus from overseas markets to the domestic market."

Now what

Looking ahead, revenue in the third quarter is expected to be in the range of 310 million yuan ($43.9 million) to 360 million yuan ($51 million), which includes the deconsolidation of LiveMe's revenue since Cheetah Mobile no longer holds a majority stake in that company.

"In addition, Cheetah Mobile has a very strong balance sheet," added CFO Thomas Ren. "Backed by our clear, strategic focus, strict cost saving measures, and strong cash position, we are confident in our ability to improve our financial condition in the coming quarters."

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

Cheetah Mobile Inc. Stock Quote
Cheetah Mobile Inc.
CMCM
$0.68 (-2.29%) $0.02

*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
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

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.