Renren Continued To Disappoint With Q3 Results

Renren (NYSE:RENN) reported another quarter of disappointing results in Q3 2015, with 36.4% decline in revenue. ^[1] While no update was offered on the non-binding proposal to take the company private, the management also skipped its regular earnings call this quarter. We note that while Renren’s core business continues to face major headwinds pertaining to intense competition and inability to monetize mobile user base, little public information is known on the fair value of its asset portfolio. We continue to remain pessimistic on the company’s future outlook, on concerns pertaining to less transparency and entry into new vertical segments (online finance).

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Online Advertising And Games Businesses Continue To Plummet

Renren’s online advertising revenues fell substantially by 77% year-over-year during Q3 2015 to $1.5 million. This is as the company continues to face challenges in attracting new advertisers and in monetizing its mobile user base. This revenue drop occurred even while the monthly unique log-in user base on the social networking platform rose by 1 million year-over-year to 45 million in September, 2015. This suggests that the company is unable to tackle rising competition in the online advertising space and seems to have given up on this opportunity.

Moreover, gaming net revenue decreased by 53% annually, as the older games completed their life cycle. We expect this business to see continued drop in the coming quarters, owing to reduced focus on this business.

Internet Value-Added Services Business Is Currently Being Targeted By Renren’s Management

In spite of the decline in the overall business, Renren’s IVAS revenues surged by over 50% to $7.1 million, owing to growth in Internet finance and the  woxiu businesses. Though the management is currently focusing on Internet finance to reinvigorate growth and to monetize student user base, the company continues to incur heavy losses. During Q3 2015, Renren’s operating loss was recorded at $23.2 million, and we expect it to remain unprofitable in the near-future.

We are in the process of revising our $2.50 price estimate for Renren.

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1. Renren Announces Unaudited Third Quarter 2015 Financial Results, Renren Investor Relations, Nov 27, 2015 [↩]