8 Reasons to be bullish on RENN:
1. RENN broke it’s downtrend earlier this month. The long green candlestick on increased volume Friday only further illustrates the momentum shift in this stock
RENN YTD Candlestick Chart with RSI
2. We wrote earlier this month about a possible ‘Golden Cross‘ formation occurring on the charts for RENN. It appears this is happening now.
3 Month Chart with 15 & 50 Day Moving Avg's - Golden Cross
3. RENN is aggressively passing through multiple moving averages. If it takes run at the 150 day MA on Monday and holds above $6.13, we could see it go to $10 in the near term
9 Month Chart with 50, 100, 150 Day Moving Averages
4. Undervalued – According to Yahoo! Finance, RENN has zero debt and total cash per share of $3.05. Couple this with the growth of the company and growth of the Chinese middle class and you can see the potential here. Renren missed earnings by approx. $1 million in Q3, mainly because Renren has been investing heavily in it’s e-commerce site Nuomi.com which was the only business segment that actually lost money last quarter. This loss is really irrelevant for a billion+ dollar company with no debt and lots of cash on hand.
5. Good earnings on the horizon? – Q4 earnings in Feb could easily beat expectations – If Renren can break even or turn a slight profit with Nuomi.com (e-commerce & group buying site) then they should have good Q4 earnings. Even if Nuomi is in the red again, RENN sold it’s stake of elong.com to Expedia.com in Nov 2011 for roughly $72.4 million, which will more than offset any losses. The one time cash infusion will look great on the company’s income statement come earnings time. Keep in mind Renren.com, is the 19th most visited site in China, which has 500+ million internet users and 366 million mobile phone users; earnings will happen, it’s just a matter of time.
6. Facebook Effect – with Facebook IPO expected to be valued in the $75 to $100 billion range investors may flock to smaller competitors such as RENN and QPSA. It would come as no surprise if Facebook has or will start to pick up large blocks of RENN stock on the open market as well; making Renren Inc. a serious buyout candidate.
7. More gains and the shorts will have to cover – This stock has been a favourite with bears who shorted the stock into the $3′s. There wasn’t a lot of covering on Friday. The bears looked trapped and if RENN continue to gain they will have to exit their positions or the banks could do it for them. If rapid short covering happens on Monday, the stock could move north fast.
8. Share Repurchase has been in place since Sept 2011 – In late Sept 2011, Renren Inc. management announced a share repuchase program for up to $150 million worth of stock. The company has been suprisingly quiet about the repurchase since this time. If they have been buying back stock in $3 – $5 dollar range agressivley since Sept, they could have drastically reduced the float of avaialbe stock on the open market. Strong demand and decreased supply is great news for the bulls.
The 1 thing to add to this list is a common error made by US Investors, understandably so, to adjust for the Currency Valuation.
Most Chinese companies deal with Exports, and we're use to that.
But for a company to generate One-USD, One-Million/USD's an adjustment needs to be mae in order to understand the Real VALUE involved. One-Million/USD's Earned in China is equal to half a million Average Day's Wages, or about $50-Million/USD
IOW, its easier to generate 1-Million/USD for a company that Earns Internally from the USA, but to Earn 1-Million/USD internally from within China is a great deal more.
This is one item that most investors fail to factor-in
DANG and QPSA already had their big moves. Today was RENNS turn. FACEBOOK IPO is going to wake the market up. Smaller plays like KUTV got rights to use YOUTUBE also. I like some of the game mobile and plays like GA COOL GU and GLUU also. Social media and mobile have been hit very hard this last year.