Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Renren Is Still Going the Wrong Way

By Rick Munarriz - Mar 19, 2014 at 10:30AM

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

Renren continues to struggle.

The headline numbers may seem encouraging in eyeing Renren's ( RENN 3.13% ) quarterly report last night. Revenue of $30.7 million exceeded the $30.1 million that Wall Street targeted. The Chinese social networking company also surprised investors by posting a chunky profit.

However, it doesn't take long for these glowing nuggets to go radioactive. Renren's revenue still plunged 29% over the past year, weighed down by double-digit percentage declines for both its namesake social networking site and the online gaming operations that have poorly mishandled the growth baton.

The profit is a mirage. Renren scored a juicy payday after selling what was initially a majority stake in its group-buying website Nuomi to Baidu ( BIDU 1.52% ). It was a surprise to see Renren be so quick to let go of its one growing property, but Baidu's money was too tempting to resist. However, it's not as if shedding Nuomi would result in improving bottom-line results beyond the one-time asset sale gain. Renren's operating loss actually nearly doubled to $42.6 million during the fourth quarter.

Yes, Renren's a mess.

When Renren went public at $14 three years ago, it was hailed as China's Facebook ( FB 1.55% ). It probably helped that Facebook had yet to go public, giving investors little to compare its performance to. Renren has always struggled with profitability in its public tenure, but at least it was growing until the past few quarters. 

Comparing Facebook to Renren is a silly exercise these days. It's not just that Facebook is very profitable. It is growing at a time when Renren is going backwards. Monthly unique log-in users have fallen from 56 million to 45 million through the course of 2013.

There's also the mobile challenge. Facebook has embraced new ways to monetize usage on smartphones and tablets. Renren is struggling on that front. It even singled out "the continuing migration of our traffic from PC to mobile" as a reason for its sharp top-line slide.

Renren's in a bad place. It has no more growing assets to sell. Fading usage at a time when the Chinese Internet market is expanding isn't pretty. The Internet remains a vibrant playground for investors in China, and market darling Baidu bears that out. Renren just isn't clicking with users, and that's not going to lift this busted IPO anytime soon.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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

Renren Inc. Stock Quote
Renren Inc.
RENN
$26.35 (3.13%) $0.80
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
FB
$322.81 (1.55%) $4.94
Baidu, Inc. Stock Quote
Baidu, Inc.
BIDU
$149.89 (1.52%) $2.24

*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 service.

Stock Advisor Returns
633%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

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

Our Most Popular Articles

Premium Investing Services

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