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

Why Renren, Inc. Shares Plunged Today

By Brian D. Pacampara, CFA - Mar 19, 2014 at 12:35PM

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

Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese social networking company Renren ( RENN -0.46% ) sank 13% today after its quarterly results and outlook disappointed Wall Street.

So what: The stock had plunged sharply in recent weeks on concerns over continued revenue weakness, and today's Q4 results -- operating loss of $42.6 million on a revenue decline of 29% -- coupled with downbeat guidance only confirm those headwinds. In fact, Renren's monthly active users dropped 20% to 45 million in December while gross margin plunged to 42.2% from 59.6% in the year-ago period, prompting investors to jump ship on the expectation of even further declines ahead.

Now what: Management now expects Q1 revenue of between $23 million and $25 million, representing as much as a 45% decline over the year-ago period. "Looking into 2014, we will further invest in our core business and cement our strength in China's university and young user demographics, a segment we have always served best," Chairman and CEO Joseph Chen reassured investors. "We aim to continue to build the intrinsic value of our company assets that can bring long-term, sustainable value to our shareholders." Given Renren's still-pristine balance sheet and beaten-down stock price -- now off about 30% from its 52-week highs -- the downside might even be limited enough to bet a bit on that bullishness.

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.
$25.88 (-0.46%) $0.12

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2021.

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.