Dip in stock ratings to reduce holdings

Morgan Stanley today released its investment report, dropping its nasdaq:cyou rating from "holding" to "reduced holdings", lowering its target share price from $40 to $26.

The following is a summary of the contents of the report:

A huge dip in investment will result in the company appearing its first quarterly loss since the IPO. These investments help to ensure a long term business growth, but we think it may affect the near-term performance of its stock. To this end, we will swim stock rating from the "Hold-see" to "reduce holdings." If profit margins continue to rise in the future, we may be able to reset their stock ratings.

Increased marketing and research spending: The tour is expected to be a loss of $16 million to 22 million dollars in the first quarter of the 2014 fiscal year, based on non-US general accounting standards, and is largely dragged down by increased spending on marketing and research and development. Mobile business is a core of the tour, the company is vigorously promoting 17173.com, mobile should and browsers. Fiscal year 2013, the net profit was 43 million U.S. dollars, the chain fell 41%, down 43% year-on-year.

Traditional game downturn: "Tianlong eight" and the future of web games is still bleak. The tour forecast that the first quarter of this year's game revenue will fall 4% to 7%, the year-on-year decline of 1% to 4%, the expectation is disappointing. Although the launch of the "Tianlong Eight" new information, but the fourth quarter of the game's total average monthly active users of 25 million, the chain down 19%, down 34% year-on-year.

Adjusted performance expectations: We will be in the 2014 fiscal year and 2015 only next year's revenue forecast to reduce the 8% to 10%, The diluted earnings per share of fiscal year 2014 is expected to be adjusted from USD 5.71 to a diluted loss of USD 0.37, with the projected earnings per share of fiscal year 2015 reduced from 6.16 to 4.19 US dollars to reflect higher marketing and research and development costs.

Higher net cash: As of December 31, 2013, the Tour has a net cash of 566 million U.S. dollars, accounting for its market value of 35% to 40%. As of July 2015, the tour also had 83 million dollars worth of shares to buy back.

Valuation: We will dip the stock rating from the "Hold-see" to "reduce", the target share price from 40 U.S. dollars to 26 U.S. dollars.