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Technology Stocks In Focus : Cheetah Mobile Inc (ADR)(NYSE:CMCM)

On Monday, Shares of Cheetah Mobile Inc (ADR)(NYSE:CMCM), gains 8.25percent and now trading at $11.42. The 52-week range of the share price is from $8.77 – $13.79. The beta value for this stock stands at N/A points, while its earnings per share (EPS) is $-0.08. The company has total market capitalization of $1.66B and a total of 380.92M outstanding shares.

Cheetah Mobile Inc. (NYSE: CMCM), a most important mobile internet company that aims to give most important apps for mobile consumers global and connect consumers with personalized content on the mobile platform, recently declared its unaudited merged financial results for the 1st– quarter finished March 31, 2017.

1st- Quarter 2017 Financial Highlights:

Total revenues increased by 6.80 percent yoy to RMB1,190.70 percent (US$173.00 percent), mainly driven by development in revenues from content-driven applications, which contributed to 18.80 percent of total revenues in the 1st- quarter of 2017, as contrast to 11.30 percent in the 4th– quarter of 2016.

Net income attributable to Cheetah Mobile investors increased by 752.20 percent yoyto RMB91.20 percent (US$13.30 percent).  Non-GAAP net income attributable to Cheetah Mobile investors increased by 13.2 percent yoy to RMB115.60 percent (US$16.80 percent).

1st- Quarter 2017 Key Operating Metrics:

  • The number of worldwide mobile monthly active clients (“Mobile MAUs”) was 603.20 percent in March 2017. The number of Mobile MAUs from markets outside of China, or overseas markets, accounted for 78.80 percent of the total number of Mobile MAUs in March 2017.
  • Sheng Fu, Cheetah Mobile’s CEO, stated, “2017 is a year of transformation for Cheetah Mobile. We will carry on to improve our artificial intelligence-based technology platform that brings new opportunities to the mobile utility space and drives the quick development of our mobile content goods.  We are encouraged by the strong performance we are witnessing in Live.me, one of our victorious content-driven goods in the overseas markets.  Driven by Live.me’s robust results, our overseas revenues1 achieved a record high in the 1st- quarter of 2017.  We believe Live.me’s recent financing by external investors is an endorsement of its strong future market potential and will give more flexibility for Live.me to perform its development policy.  Looking at our core utility apps, A.I. allowed us to further enlarge our utility product portfolio even though the section has reached a more mature stage of its product cycle.   For example, we launched Panda Keyboard, an AI-facilitated application, early this year.  Recently, Panda Keyboard has become one of the top 5.00 personalized applications in the United State on Google Play.  Importantly, our utility goods and related services carry on to generate strong profits, which lay a solid foundation for our mobile content transformation.  Going onward, we remain concentrated on content and artificial intelligence to drive additional development of our business.”
  • Vincent Jiang, Cheetah Mobile’s CFO, remarked, “It is becoming increasingly clear that our total revenue growth is driven by the quick growth of our content-driven goods. We carry on to optimize cost structure on the utility goods side to maintain profitability and support the development of our content-driven goods.  As our different business lines are in different stages of development, starting this quarter, we will report our revenues according to business lines to help investors better understand our businesses. We expect to give more transparency in our operations in the coming quarters.”.

1st- Quarter 2017 Merged Financial Results:

REVENUES:

Total revenues increased by 6.80 percent yoy to RMB1,190.70 percent (US$173.00 percent) in the 1st- quarter of 2017.  Starting from the 1st- quarter of 2017, the Company will report its revenues according to the following business lines:

Revenues from utility goods and related services mainly consist of revenues generated by the Company’s mobile utility applications, internet browsers and PC security software.  The Company’s portfolio of utility goods has attracted a massive client base, which facilitated the company to become one of the most important online and mobile advertising platforms.  Revenues from the Company’s utility goods and related services for the 1st- quarter of 2017 diminished by 12.90 percent yoy and 18.00 percent quarter over quarter to RMB827.20 percent (US$120.20 percent), mainly because of diminished PC revenues as a result of the migration of internet traffic from PC to mobile phones in China.  The quarter-over-quarter variation was also affected by seasonality in advertising in both China and the overseas markets.

Revenues from content-driven goods consist of revenues generated by Live.me and News Republic. Live.me, which was launched in the fourth quarter of 2015, is a popular live video streaming application serving overseas clients, especially in developed countries.  Clients can purchase virtual gifts using virtual currencies the Company sells on Live.me to show support and appreciation to their favorite broadcasting hosts.  News Republic, which was attained by the Company in the 2nd– quarter of 2016, is a famous news feed application that brings personalized news and advertisements driven by the Company’s artificial intelligence-based technologies. Revenues from the content-driven goods for the 1st- quarter of 2017 increased by 55.20 percent quarter over quarter to RMB223.80 percent (US$32.50 percent).  The quarter-over-quarter boost was mainly driven by a fast development of Live.me broadcasting revenue.

Revenues from mobile game business mainly consists of revenues from the operations of mobile games.  The Company’s portfolio of mobile games has attracted a massive user base, which gives ample advertising revenue opportunities.  Consumers can also purchase in-game virtual items.  Revenues from mobile game business for the 1st- quarter of 2017 diminished by 15.70 percent YOY but increased by 15.10 percent quarter over quarter to RMB139.70 percent (US$20.30 percent).  The yoy decrease was mainly because of a decrease in revenues from Piano Tiles 2.00, as the user number was at its peak in early 2016.  The quarter-over-quarter increase was mainly because of the Company’s continuous hard works to introduce more mobile casual games in the 1st- quarter of 2017, further enriching its mobile game portfolio.

By platform, revenues generated from mobile business increased by 22.00 percent yoy, but diminished by 2.40 percent quarter over quarter to RMB1,008.40 percent (US$146.50 percent) in the 1st- quarter of 2017.  The yoy increase was mainly driven by the fast development of the Company’s Live.me business in the overseas markets.  The quarter-over-quarter decline was mainly attributable to seasonality in advertising in both China and the overseas markets.

 

By region, revenues generated from the overseas markets increased by 33.90 percent yoy and 1.90 percent quarter over quarter to RMB848.30 percent (US$123.20 percent) in the 1st- quarter of 2017.  The increases were mainly driven by the quick development of the Company’s Live.me business in the overseas markets.

COST OF REVENUES AND GROSS PROFIT:

  • Cost of revenues increased by 42.70 percent yoy, but diminished by 1.30 percent quarter over quarter to RMB458.00 percent (US$66.50 percent) in the 1st- quarter of 2017. The yoy increase was mainly driven by increased investments in the Company’s content-driven goods. Non-GAAP cost of revenues increased by 42.50 percent yoy, but diminished by 1.40 percent quarter over quarter to RMB457.00 percent (US$66.40 percent) in the 1st- quarter of 2017.
  • Gross profit diminished by 7.70 percent yoy and 9.60 percent quarter over quarter to RMB732.80 percent (US$106.50 percent) in the 1st- quarter of 2017. Non-GAAP gross profit diminished by 7.60 percent yoy and 9.60 percent quarter over quarter to RMB733.70 percent (US$106.60 percent) in the 1st- quarter of 2017.

OPERATING INCOME AND EXPENSES:

  • Total operating costs diminished by 8.50 percent yoy and 5.60 percent quarter over quarter to RMB706.40 percent (US$102.60 percent) in the 1st- quarter of 2017. Total non-GAAP operating costs increased by 0.30 percent yoy, but diminished by 1.70 percent quarter over quarter to RMB683.00 percent (US$99.20 percent) in the 1st- quarter of 2017.
  • Research and growth costs diminished by 7.80 percent yoy and 18.70 percent quarter over quarter to RMB191.40 percent (US$27.80 percent) in the 1st- quarter of 2017, mainly because of diminished share-based compensation costs and lower research and growth personnel costs for its utility goods, which was partially offset by increased personnel costs in the growth of artificial intelligence technologies and content-driven goods. Non-GAAP research and growth costs, which exclude share-based compensation costs, increased by 8.60 percent yoy, but diminished by 14.50 percent quarter over quarter to RMB181.80 percent (US$26.40 percent) in the 1st- quarter of 2017.
  • Selling and marketing costs diminished by 6.70 percent yoy but increased by 1.50 percent quarter over quarter to RMB414.30 percent (US$60.20 percent) in the 1st- quarter of 2017. The yoy decrease was because of lower costs on promotional activities for its utility goods, which was partly offset by increased product promotional activities for its content-driven apps. Non-GAAP selling and marketing costs, which exclude share-based compensation expenses, diminished by 5.30 percent yoy, but increased by 1.60 percent quarter over quarter to RMB414.50 percent (US$60.20 percent) in the 1st- quarter of 2017.
  • General and administrative expenses diminished by 22.20 percent yoy and 18.30 percent quarter over quarter to RMB103.60 percent (US$15.00 percent) in the 1st- quarter of 2017, mainly because of diminished share-based compensation costs and professional service fee. Non-GAAP general and administrative expenses, which exclude share-based compensation costs, increased by 1.50 percent yoy, but diminished by 6.90 percent quarter over quarter to RMB89.50 percent (US$13.00 percent) in the 1st- quarter of 2017.
  • Operating profit increased by 18.30 percent yoy, but diminished by 57.70 percent quarter over quarter to RMB26.30 percent (US$3.80 percent) in the 1st- quarter of 2017. The yoy increase was mainly attributable to the Company’s overall revenue development and policy to implement cost control for its utility goods, which was partially offset by increased investments in its content-driven goods. The Company’s content-driven goods lowered its operating margin by about 14.40 percent points in the 1st- quarter of 2017.  The quarter-over-quarter decrease in operating profit was mainly because of a decrease in revenues from the Company’s utility goods and services in the quarter, which was mainly because of seasonality in advertising in both China and the overseas markets.
  • Non-GAAP operating profit diminished by 55.40 percent yoy and 56.50 percent quarter over quarter to RMB50.70 percent (US$7.40 percent) in the 1st- quarter of 2017.
  • Share-based compensation costs diminished by 73.40 percent yoy and 55.00 percent quarter over quarter to RMB24.40 percent (US$3.50 percent) in the 1st- quarter of 2017, mainly because of the change in the estimated forfeiture rates of share-based compensation.

OTHER INCOME, NET:

Other income, net was RMB67.70 percent (US$9.80 percent) in the 1st- quarter of 2017, which was mainly because of gains on disposal of certain investment assets in the 1st- quarter of 2017.

NET INCOME ATTRIBUTABLE TO CHEETAH MOBILE SHAREHOLDERS:

Net income attributable to Cheetah Mobile investors increased by 752.20 percent yoy and 55.20 percent quarter over quarter to RMB91.20 percent (US$13.30 percent) in the 1st- quarter of 2017.

Non-GAAP net income attributable to Cheetah Mobile investors increased by 13.20 percent yoy and 2.30 percent quarter over quarter to RMB115.60 percent (US$16.80 percent).

NET INCOME PER ADS:

Diluted income per ADS in the 1st- quarter of 2017 was RMB0.640 (US$0.090), as contrast with RMB0.070 in the prior year period and RMB0.410 in the previous quarter.

Non-GAAP diluted income per ADS in the 1st- quarter of 2017 was RMB0.810 (US$0.120), as contrast with RMB0.710 in the prior year period and RMB0.800 in the previous quarter.

ADJUSTED EBITDA:

Adjusted EBITDA (Non-GAAP) diminished by 42.10 percent yoy and 45.00 percent quarter over quarter to RMB87.30 percent (US$12.70 percent) in the 1st- quarter of 2017.

CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS BALANCE:

As of March 31, 2017, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB1,960.30 percent (US$284.80 percent).

SHARES ISSUED AND OUTSTANDING:

As of March 31, 2017, the Company had a total of 1,430,736,715.00 Class A and Class B ordinary shares issued and exceptional.  One ADS represents 10.00 Class A ordinary shares.

Business Outlook:

For the 2nd– quarter of 2017, the Company anticipates its total revenues to be between RMB1,190.00 percent (US$173.00 percent) and RMB1,240.00 percent (US$180.00 percent), representing a yoy increase of 14.00 percent to 18.00 percent and a quarter-over-quarter increase of 0.00 percent to 4.00 percent.  This estimate represents administration’s preliminary view as of the date of this release, which is subject to change.

Conference Call Information:

Company will have a conference/discussion call on Monday, May 22, 2017 at 8:00 a.m. Eastern Time or 8:00 p.m. Beijing Time to talk about the financial results.  Listeners may access the call by dialing the following numbers:

Worldwide:  +1-412-902-4272

U.S Toll Free:  +1-888-346-8982

China Toll Free:  4001-201203

Hong Kong Toll Free:  800-905945

Conference ID:  Cheetah Mobile

Technical Analysis:

The average true range of the stock is recorded at 0.50 and the relative strength index of the stock stands 57.24. The stock price is going above to its 52-week low with 30.44 percent and down from its 52-week high with -17.04 percent.

The stock has shown weekly performance of -5.71 percent and monthly performance stands at -1.77 percent. The stock price is trading upbeat from its 200 days moving average with 4.56 percent and up from 50 days moving average with 3.68 percent.

Analyst recommendation for this stock stands at -3.30.

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