Youku Rises on Share Buyback Plan as Alibaba Spurs JD.comBelinda Cao
Youku Tudou Inc. rallied in U.S. trading as the online video operator announced plans to buy back shares after they plunged 12 percent following an earnings report that missed analyst estimates.
Youku’s American depositary receipts rose 2.7 percent yesterday in New York, paring their decline since the second-quarter results earlier this month. JD.com Inc., China’s second-largest e-commerce company after Alibaba Group Holding Ltd., climbed to the highest since its May U.S. debut, while smaller online retailers Jumei International Holding Ltd. and E-Commerce China Dangdang Inc. declined. The Bloomberg China-US Equity Index slumped 0.2 percent to 117.32.
Beijing-based Youku, which runs China’s biggest video websites, said yesterday its board approved a plan to repurchase as much as $300 million of its ADRs with cash. The shares sank
9.3 percent on Aug. 20 after the company’s second-quarter revenue and third-quarter forecast disappointed investors. JD.com rallied after Alibaba, which is preparing for a U.S. listing, said that profit almost tripled to $1.99 billion in the three months ended in June.
“Youku announced the share buyback plan to make stock investors happy after the price dropped,” Henry Guo, a San Francisco-based analyst at JG Capital, said by phone. “Alibaba’s strong results suggest not only its own enduring growth but also the big potential in China’s e-commerce space, which will allow many operators to enjoy expansion.”
Youku climbed to $19.54, the biggest rally in two weeks. Trading volume was more than double the 90-day average, data compiled by Bloomberg show. The stock is now down 9.2 percent since the day of the earnings report. It has slumped 36 percent this year after gaining 66 percent in 2013.
JD.com rose 2 percent to $32.64. The ADR has surged 72 percent since its May 21 initial offering. JD.com’s four-day gain was the longest stretch of advances in two months.
Alibaba, based in Hangzhou, said in a filing to the Securities and Exchange Commission that revenue rose 46 percent in local currency to the equivalent of $2.54 billion. Margin on adjusted earnings before interest, taxes, depreciation and amortization declined in the three months ended in June to 54 percent from more than 56 percent a year earlier.
“You’ve got fierce competition in this sector as most players are spending money to expand market share without focusing on their bottom lines,” said Guo.
Beijing-based Jumei tumbled 6.7 percent to $31.72, the lowest level since Aug. 7. Vipshop Inc, an online fashion retailer, slipped 1.3 percent to $214.11, trimming its 2014 gain to 156 percent. Dangdang fell 1.9 percent to $14.66, slumping the most since Aug. 14.
Vipshop’s adjusted operating margin dropped last quarter from the previous three months, and companies from travel site Qunar.com Inc. to classifieds provider 58.com Inc. also reported declining margins as they boosted spending to expand market share.
The iShares China Large-Cap ETF, the biggest Chinese exchange-traded fund in the U.S., fell 0.7 percent to $41.02, halting a three-day gain. The Standard & Poor’s 500 Index was little changed after the gauge surpassed 2,000 the previous day.
The Hang Seng China Enterprises Index sank 0.5 percent to 11,074.31 yesterday, the first decline in four days. The Shanghai Composite Index rose 0.1 percent to 2,209.47, advancing for the first time this week.