U.S. Markets close in 2 hrs 59 mins

Why BitAuto Holdings Stock Plunged Today

Steve Symington, The Motley Fool

What happened

Shares of BitAuto Holdings (NYSE: BITA) were down 11.6% as of 2:30 p.m. EDT Thursday after an analyst downgrade of the Chinese online automotive marketing services company.

More specifically, Macquarie analyst Wendy Huang downgraded BitAuto Holdings to "Neutral" from "Outperform." Huang also assigned a $29-per-share price target on the stock, representing a roughly 20% premium from its current trading price after today's decline.

Wall Street road sign with American flags in the background.

Image source: Getty Images.

So what

Keeping in mind BitAuto stock only just surged yesterday on the company's better-than-expected first-quarter 2018 results, Huang justified her relative bearishness by noting that BitAuto's forward guidance was "largely in line" with estimates. For perspective, that guidance calls for second-quarter revenue between $393.8 million and $401.7 million, or growth of between 23.8% and 26.3%.

Now what

To be clear, that would still be an admirable feat considering BitAuto is fending off steep competition in the space -- something CEO Andy Zhang notes it's able to do with the help of strategic investors like Tencent and JD.com. Still, with BitAuto shares having risen more than 20% over the past two weeks after yesterday's pop, it was no surprise to see some on Wall Street paring their enthusiasm.

More From The Motley Fool

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends JD.com and Tencent Holdings. The Motley Fool has a disclosure policy.