Android app on Google Play

Goldman Sachs Remains Bullish But Cuts Price Target on Youku.com (YOKU) Due to Higher Costs

October 27, 2011 1:39 PM EDT Send to a Friend
Get Alerts YOKU Hot Sheet
Price: $25.82 -3.22%

Rating Summary:
    7 Buy, 9 Hold, 2 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 23 | Down: 10 | New: 20
Trade YOKU Now!
Join SI Premium – FREE
Goldman Sachs is reaffirming Buy rating on shares of Youku.com (NYSE: YOKU), but is lowering its price target and estimates to account for a more aggressive investment outlook for 2012.

The firm is raising its content cost growth forecast for 2012 from 103 percent to 135 percent. Goldman believes the company will spend more on discretionary and special content. They also anticipate that the cost of bandwidth will increase by 63 percent year over year in 2012, a 23 percent increase from the firm's previous estimate.

Due to their new outlook on expenses, Goldman is lowering its gross margin estimates for 2011 and 2012 from 28 percent and 32 percent to 26 percent and 23 percent.

An analyst at Goldman comments, "Given the allure of China’s online video revenue opportunity, we do not expect topfive consolidation in the next year, and we view the purchase of expensive content by some companies as less of a concern. We expect the well-known rapid inflation of content costs to persist as top firms continue to fill out and balance their portfolios against each other. We see sustained robust demand for video advertising, particularly from domestic consumer goods firms."

Due to the firm's new expenses and spending outlook, Goldman has reduced its fiscal 2011 earnings estimate by 19.8 percent to a loss of $0.11 per share. The firm reaffirmed its fiscal 2012 estimate of a loss of $0.09 per share and slashed its fiscal 2013 estimate by 31.9 percent to $0.32 percent. To go inline with market trends and the firm's new estimates, Goldman has lowered its price target from $44 to $42.

For more ratings news on Youku.com click here and for the rating history of Youku.com click here.

Shares of Youku.com closed at $19.64 yesterday.




You May Also Be Interested In


Related Categories

Analyst Comments

Related Entities

Goldman Sachs, Earnings

Add Your Comment