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Bear of the Day: Autohome (ATHM)

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Autohome Inc. (ATHM) is benefiting from the consumer rush to buy and research cars online in China. However, this Zacks #5 (Strong Sell) has had its full-year earnings estimates cut in the last month.

Autohome operates a website for auto consumers in China with over 40 million daily active users. It provides original content, a comprehensive auto library and extensive auto listing information to automobile consumers, covering the entire car purchase and ownership cycle.

The company has a dealer subscription and advertising service which allows dealers to market their inventory and services through Autohome's platform. Autohome offers sales leads, data analysis, and marketing services to assist automakers and dealers with improving their efficiency and facilitating transactions.

Autohome operates "Autohome Mall" its full-service online transaction platform, to facilitate transactions for automakers and dealers.

It also provides auto financing, auto insurance, used car transactions and aftermarket services through its websites and mobile applications.

A First Quarter Miss

On May 27, Autohome reported its first quarter results and missed on the Zacks Consensus by a penny.

Earnings were $0.92 versus the Zacks Consensus of $0.93.

Revenue rose 19.1% year-over-year to $281.1 million as Online Marketplace and Other Revenues rose 74% to $82.3 million.

Data Products revenue jumped 64.4% over last year's quarter.

"During the quarter, we deepened our cooperation with new energy vehicle ("NEV") automakers in order to capture more growth opportunities. We also upgraded our main App with a more streamlined interface and cleaner functionality, further enhancing our user experience and with younger demographics in mind," said Mr. Quan Long, CEO and Chairman of the Board.

Why Is Autohome a Zacks Strong Sell?

The Zacks Rank is based on changes to analyst earnings estimates.

2 estimates were lowered on Autohome for 2021 and 2022 in the last 30 days, and none were raised.

The 2021 Zacks Consensus fell to $4.79 from $5.16 during that time. That's earnings growth of just 3.5% over 2020 when the company made $4.63.

The 2022 Zacks Consensus Estimate has also fallen in the last month, as 2 estimates were also cut for next year.

It has dipped to $5.40 from $5.90.

A Bargain Stock?

Shares have cooled this year, falling 30.5% year-to-date and 25% in the last month.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

They now trade with a forward P/E of just 14.9.

With solid earnings, the company has a PEG ratio of just 0.9. A PEG under 1.0 usually indicates a company has both growth and value, a rare combination.

American online car retailer Carvana (CVNA), by comparison, doesn't even have a P/E as it's expected to lose $1.62 this year. It's a Zacks Rank #3 (Hold).

Investors interested in Chinese value stocks should keep Autohome on their short list for changes in the Zacks Rank.

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