Why Fangdd Network Group Ltd – ADR (NASDAQ: DUO) stock is crashing

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Fangdd Network Group Ltd – ADR (NASDAQ: DUO) stock continued its crash falling over 19.2% on 11th June, 2020 (as of 10:18 am GMT-4; Source: Google finance) after the company in the first quarter of FY 20 has reported the adjusted loss per share of $25 and 58.5 percent decline in the adjusted revenue to RMB272.1 million (US$38.4 million) from RMB656.0 million in the same period of 2019. The decline in revenue is driven by the outbreak of COVID-19 in China and the resulted in restraints imposed on real estate agents, which had negatively affected the ability of agents to carry out business during the period. The decline in the business activity of agents led to decline in both the number of transactions and GMV (46.5% year-over-year decline in total closed-loop GMV) facilitated on the Company’s marketplace and thus significantly affected the Company’s revenue generation capabilities. The company generated increase in Non-GAAP loss from operations in the first quarter of 2020 of RMB113.6 million (US$16.0 million) compared to a non-GAAP income from operation of RMB5.1 million in the same period of 2019. Overall, the company has reported Non-GAAP net loss in the first quarter of 2020 of RMB110.0 million (US$15.5 million) compared to non-GAAP net income of RMB14.8 million in the same period of 2019. At the end of March, 2020, the Company’s cash and cash equivalents, restricted cash, and short-term investments stood at RMB1,071.7 million (US$151.4 million), had short-term bank borrowings of RMB488 million (US$68.9 million) and an un-utilized bank facilities of RMB315.0 million (US$44.5 million).

Moreover, the company delivered 59.3% decrease in the gross profit in the first quarter of 2020 to RMB49.4 million (US$7.0 million) from RMB121.5 million in the same period of 2019. Gross margin in the first quarter of 2020 stood at 18.2%, which is inline compared to the same period of 2019.

Meanwhile, at the end of March, 2020, the company had grown the number of registered agents on the platform by 35.4% to about 1.32 million from about 0.97 million as of 31st March 2019. The active agents on the marketplace in the first quarter of 2020 rose 42.8% year-over-year to 218,400. The number of agents who had completed transactions on the marketplace in the first quarter of 2020 has fallen by 50.1% year-over-year to 6,700. For the second quarter of 2020, the Company projects its revenue to be in the range of RMB660 million and RMB720 million.

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