Youku.com (YOKU) PT Trimmed at Nomura; 'Buy' Maintained

Nomura Securities analyst Chao Wang reiterated a Buy rating but lowered its price target on Youku.com (NYSE: YOKU) to $24.00 (from $26.00), noting solid top-line growth for 2015 but a still competitive sector.

Wang commented, "We expect Youku’s ad revenue to grow 37% y-y in 2015F benefiting from a continuous budget shift from TV and other display ads to online video ads. In 4Q, its mobile ad revenue accounted for 35% of total revenue. Consumer revenue which includes subscription, mobile game, and live show also grew 67% q-q. Active subscription users have reached 1mn, with subscription revenue up 50% q-q, demonstrating changing user behaviour and a diversifying revenue stream."

The analyst continued, "However, the competitive landscape remains challenging for Youku. We understand both Tencent and iQiyi have signed a series of head content contracts domestically and abroad. Thus, we expect Youku’s stepped-up in video content may further broaden the loss gap and we expect net profit to turn positive in 2017F. We believe industry consolidation is likely and may become a potential catalyst, although the timing is uncertain."

For an analyst ratings summary and ratings history on Youku.com click here. For more ratings news on Youku.com click here.

Shares of Youku.com closed at $13.50 yesterday.

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