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Market Sentiment Around Loss-Making Qutoutiao Inc. (NASDAQ:QTT)

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·3 min read
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With the business potentially at an important milestone, we thought we'd take a closer look at Qutoutiao Inc.'s (NASDAQ:QTT) future prospects. Qutoutiao Inc. operates mobile platforms for the distribution, consumption, and sharing of light entertainment content in the People’s Republic of China. On 31 December 2020, the US$592m market-cap company posted a loss of CN¥1.1b for its most recent financial year. As path to profitability is the topic on Qutoutiao's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Qutoutiao

According to some industry analysts covering Qutoutiao, breakeven is near. They expect the company to post a final loss in 2022, before turning a profit of CN¥229m in 2023. Therefore, the company is expected to breakeven roughly 2 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 84%, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

We're not going to go through company-specific developments for Qutoutiao given that this is a high-level summary, but, bear in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

One thing we would like to bring into light with Qutoutiao is it currently has negative equity on its balance sheet. This can sometimes arise from accounting methods used to deal with accumulated losses from prior years, which are viewed as liabilities carried forward until it cancels out in the future. These losses tend to occur only on paper, however, in other cases it can be forewarning.

Next Steps:

There are too many aspects of Qutoutiao to cover in one brief article, but the key fundamentals for the company can all be found in one place – Qutoutiao's company page on Simply Wall St. We've also put together a list of important aspects you should further research:

  1. Historical Track Record: What has Qutoutiao's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Qutoutiao's board and the CEO’s background.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.