Why Qutoutiao Inc – ADR (NASDAQ: QTT) stock is under pressure

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Qutoutiao Inc – ADR (NASDAQ: QTT) stock fell 10.7% on 19th March, 2020 (Source: Google finance) after the company posted mixed results for the fourth quarter of FY 19. The company has reported the net loss of $79.2 million compared to $56.47 million, in the same period in 2018. At the end of December 31, 2019, the Company had generated cash, cash equivalents, restricted cash and short-term investments of RMB1,652.5 million (US$237.4 million), compared to RMB2,120.1 million as of Sept ember 30, 2019. The company has generated Non-GAAP loss from operations of RMB2,451.3 million (US$352.1 million), compared to RMB1,030.0 million in the fiscal year of 2018. Non-GAAP operating loss margin has increased to 44.0%, compared to non-GAAP operating loss margin of 34.1% in the fiscal year of 2018. Further, Combined average MAUs grew 46.9% to $137.9 million.

QTT in the fourth quarter of FY 19 has reported the adjusted loss per share of 27 cents, beating the analysts’ estimates for the adjusted loss per share of $2.21. The company had reported the adjusted revenue growth of 25 percent to $238,200,000 in the fourth quarter of FY 19, missing the analysts’ estimates for revenue of $1,630,000,000. Advertising revenues grew in the period to $228.2 million, which represents a year-over-year increase of 27%, on the back of its customer base improving, allowing QTT to monetize user traffic. Other revenues had declined by 25.6% to RMB154.8 million (US$22.2 million) in the fiscal year of 2019, from RMB207.9 million in the fiscal year of 2018, mainly due to the decline of revenues from agent services, which is partially offset by the increase of revenues from live-streaming, and, to a lesser extent, revenues from games and Midu’s membership service. The company has posted the gross profit of RMB3,929.4 million (US$564.4 million) in the fiscal year of 2019, which represents an increase of 56.0% from RMB2,518.5 million in the prior year. Gross margin has contracted to 70.5%, compared to 83.3% in the fiscal year of 2018.

Meanwhile, Mr. Oliver Yucheng Chen has resigned as Chief Strategy Officer of the Company due to personal reasons. He will still be serving as a director on the board of directors of the Company. Mr. Chen’s resignation took effect on February 28, 2020.

QTT expects to generate revenue in the range of $198.65 million and $201.49 million in the first quarter, representing year-over-year growth of 25% to 27%.

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