Goldman Sachs Group released its Friday research report

Goldman Sachs released its Friday study to downgrade Nyse:yoku's stock rating from "buy" to "neutral" (Neutral), but also raised its 12-month target price from $21 to $24.

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

Remove from "Asia Pacific buy list" and downgrade to "neutral"; mobile traffic growth;

Overview：

In view of the recent stock price performance of Youku and the second quarter of fiscal year 2013, we downgraded the Youku potato stock rating to "neutral". Since we added Youku to the Asia-Pacific Buy list on October 8, 2012, the price of this stock has risen 37% (the S & P 500 index has risen 20.7%), up 38.6% in the past 12 months (the S & P 500 index has risen 21.1%).

Mobile is close to half of the total flow of Youku, but we expect a major improvement in the commercialization process until 2014. Coupled with the relatively slow growth of Youku in the second quarter (due to the reorganization of the sales team after the merger and the marketing of Tudou's frame ads in the third quarter), we turned cautiously to the recent growth prospects of Youku.

Current point of view:

Youku's second-quarter results were in line with our expectations, with revenues of 753 million yuan (up 30% from a year earlier), mainly driven by the desktop commercials of international FMCG advertisers. Not in accordance with the United States General accounting standards, Youku potatoes in the second quarter of the United States depository receipts per share loss of 0.04 U.S. dollars, better than our expected loss of 0.10 U.S. dollars per share, mainly due to the general and administrative expenditure and the decline in content expenditure.

But we expect the content spending in the third quarter of Youku to grow by 30 million yuan per cent, as Youku potatoes are creating their own capacity to invest, while at the same time working to expand the main content base.

We expect the cool potato management to control bandwidth and sales, general services, and administrative spending over the next few quarters, increasing visibility for the near-term break-even timeline. We predict that Youku will return to profitability in the fourth quarter and return to profitability in fiscal year 2014. We believe that if Youku can manage its mobile investment activities, its break-even point may accelerate to the third quarter.

But we are still worried about the growth prospects of youku potatoes over the next 12 months, as traffic is moving rapidly towards mobile platforms, and Youku potatoes will take a while to penetrate local FMCG customers. And in our view, the long-term profitability problem will also bring uncertainty, because Baidu (Nasdaq:bidu) in the video sector ambitions have been enhanced.

We have edged up the earnings forecasts per share of Youku, and thus raised the 12-month target price based on the cash Flow Discount (DCF) to $24 from $21.

Risk: Cost control and demand.