Last night's quarterly results were mixed. Revenue climbed 57% to $32.8 million. Renren's profit of $48.2 million should jump out like a phony dollar bill, and rightfully so. The sale of Renren's stake in travel website operator eLong
The red ink will continue. Renren is making it clear that it will be investing heavily in the near term to grow its business and keep it on top. It is targeting revenue to climb an impressive 50% to 55% this year, though the 36% to 46% that it's projecting for the current quarter is short of where the pros were perched.
Thankfully we're not where we were back in May. When Renren went public at $14, its roughly 400 million ADS outstanding gave it a market cap of $5.6 billion. Retail investors bid up the stock to a valuation of nearly $10 billion during its opening day, unaware of the unjustifiable valuation that they were inflating.
Renren's stock now trades for a little more than a third of its IPO price, and even some may argue that a $2 billion valuation is still out of whack for a small company that Wall Street believes won't be profitable on an annual basis for another two years.
There's excitement leading up to Facebook's upcoming IPO, but jumping into any smaller social networking rival is dangerous. Renren and social discovery player Quepasa
The more established LinkedIn
If the Chinese government ultimately lets social networking websites exist in usable form, Renren will be a winner. In time, it will be worth even more than today's $2 billion price tag. However, patience is more than a virtue here. It's mandatory.
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Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.