Everyone's stock rating is lowered from shareholding to reduction

Morgan Stanley today released a study to downgrade the Nyse:renn stock rating from "holding" to "equal-weight" (underweight), while maintaining a 3.1 dollar target share price unchanged.

The following is a summary of the report:

Introduction：

Since entering this year, everyone's shares have underperformed other internet companies in China. We expect this trend to continue, given that everyone expects revenue growth to slow and losses to expand. The downgrade of everyone's stock to "reduction" reflects our relative preference for the industry. We believe that the huge net cash flow of Renren and the stock repurchase scheme will limit the downward trend of absolute stock prices to a certain level.

Weak revenue outlook and widening losses

In the first half of this year, the company's revenue growth was only 25%, well below the 49% per cent last year; competition intensified, mobile end to the line of traffic and the delay in the release of the game, the first half of the company's revenue slowdown is the main reason. In the first half of this year, the company's operating losses increased 45% year-on-year, we expect the second half of this number will be further widened to 80%.

Cut stock rating to maintain target price

The company's share price has risen 4% per cent this year, compared with 13% to 176% per cent of the rest of China's internet companies. We believe that the company's share price performance is less than the trend of other Internet companies in China, will continue in the near future. The reason we maintain our target share price for the 3.1 dollar is because the company's recent losses have been higher, but at the same time, game sales from 2014 will grow after the mobile game is released. We are more optimistic about the growth of corporate revenue and the prospect of better profitability.

Stock price Support Force

Strong net cash flow and stock repurchase schemes will provide strong support for everyone: The company holds a net cash of $836 million, accounting for 60% to 65% of the company's market value. In June this year, Renren announced a new stock repurchase scheme worth 100 million of dollars, roughly 5% to 10% of its market value.