Why BitAuto Earnings Are Worth Watching

(Photo Credit: Bill Stevenson)

Friday is a relatively quiet day for earnings, with the exception of BitAuto (BITA), which you should definitely be paying attention to. BitAuto stock is up 148% year to date and the company’s rise fits into one of the more prominent stories of the year, the awakening of Chinese internet companies.

This year we’ve seen gargantuan IPOs from Chinese e-commerce leaders Alibaba (BABA) and JD.com (JD). Shares of Alibaba have already returned over 65% from their September debut. Some of the smaller Chinese internet stocks including BitAuto are performing even better.

(Graph above from ChartIQ Visual Earnings)

Since we profiled BitAuto back in March, shares have doubled. This company is on an absolute tear for reasons which could have been foreseen. It caters to the emerging Chinese middle class and aims to disrupt a notoriously inefficient business, auto-dealerships.

BitAuto provides information on its website about car pricing, specifications, and dealership reviews and has an advertising business built on top of that. The earnings growth here is off the charts.

On Friday contributing analysts on Estimize are expecting BitAuto to report earnings of 55 cents per share. That would be an improvement of 23 cents (42%) compared to the same quarter of last year.

On the top line the Estimize community is looking for $97 million in revenue. That would be a 57% gain from last year and a moderate acceleration from the 46% and 53% year over year growth reported respectively over the previous 2 quarters of this year.

The growth and opportunity here is attractive. Car dealerships invariably add costs to the buying process and negotiating the price of a new vehicle is a hassle. It’s antiquated. The only people rooting for auto dealerships are the vendors themselves.

This is the same reason that Tesla (TSLA) is having problems with its direct selling model. Tesla wants to sell electric cars directly to consumers, and it provides all the same service and accountability that dealerships do, perhaps even more.