Why Shares of BitAuto Holdings Are Surging Today

What happened

Shares of BitAuto Holdings (NYSE: BITA) jumped on Wednesday following the company’s first-quarter report. The provider of internet content, marketing, and transaction services for the automotive industry in China easily beat analyst estimates across the board, posting blistering revenue growth well above expectations. The stock was up about 8% at 12:20 p.m. EDT after being up as much as 14.5% earlier in the day.

So what

BitAuto reported first-quarter revenue of $346.1 million, up 52.3% year over year and about $37.6 million above the average analyst estimate. Transaction services revenue more than doubled year over year to $186.9 million, while advertising and subscription revenue rose 16.3% to $125.5 million.

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Non-GAAP earnings per share came in at $0.13, beating analyst expectations by $0.21. Looking ahead to the second quarter, BitAuto expects to produce revenue between $393.8 million and $401.7 million, representing year-over-year growth between 23.8% and 26.3%.

Along with reporting its first-quarter results, BitAuto announced that Ming Xu has been appointed as chief financial officer, replacing Cynthia He.

Now what

BitAuto is seeing increasing industry competition, leading its Yixin transaction services subsidiary to enter into agreements with used automobile transaction company Yusheng. “We believe that Yixin’s cooperation with and investment in Yusheng, together with support from strategic investors such as Tencent and JD.com, will enable Yusheng to increase its competitiveness more quickly and be better positioned to benefit from the growth potential of China’s used automobile market,” said BitAuto CEO Andy Zhang “At the same time, Yusheng will give Yixin preferred cooperation rights for used car financing, which will strengthen Yixin’s core competency in financed auto transactions business.”

While BitAuto blew past analyst estimates in the first quarter, its guidance called for a revenue growth slowdown amid intensifying competition. Investors are focusing on the positives, but the stock still needs to more than triple for it to reclaim its all-time high.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends JD.com and Tencent Holdings. The Motley Fool has a disclosure policy.

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