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 Qunar Cayman Islands (NASDAQ:QUNR), a Chinese online travel company, jumped on Tuesday after the company beat analyst estimates when it reported its fourth-quarter earnings. As of 2:30 Tuesday afternoon, the stock was up nearly 10%.
So what: Revenue more than doubled year-over-year to $83.8 million, beating analyst estimates by about $4 million. Revenue generated from mobile devices surged 400% year-over-year, rising to $41.5 million during the quarter, nearly half of the company's total revenue. Flight ticket volume rose by 61.8% year-over-year, while hotel room-night volume more than doubled year-over-year.
While this fantastic revenue growth was likely the catalyst behind the surging stock price today, the good news ends there. Qunar lost an incredible amount of money during the fourth quarter, posting an operating loss of $107.4 million. For the full year, Qunar managed an operating loss of $297.3 million on revenue of just $283.1 million.
Now what: While a Chinese Internet company doesn't exactly exude trustworthiness in the first place, Qunar's business model appears completely unsustainable. The company is losing a mind-boggling amount of money, it only has $131 million in cash left on its balance sheet, and its working capital has turned negative.
Meanwhile, the stock trades at around 13.5 times sales despite these massive, unrelenting losses and a deteriorating balance sheet. Beyond the rapid revenue growth, I see nothing to like about Qunar, and investing in the stock would be an incredibly risky endeavor.