As late as the 1990s, the dominant way to sell goods and services to a wide audience was to take out a listing in a local or regional newspaper. For example, selling a car would involve calling the local newspaper office so that you could place an advertisement in their car listings section. Businesses like Craigslist, Ebay and Amazon revolutionized this business model, and made it much easier for buyers and sellers to interact and exchange goods.
Some of the most successful businesses of the internet age are also some of the simplest. They are essentially list providers that collect as much of the relevant data in one place as possible so that buyers can compare easily and sellers can have access to the most buyers. That is the business model that websites like Zillow (Z) and Trulia have perfected through their merger.
For options trading advisory services that identify businesses like this early, the gains from share prices rises can be rapid and very profitable. So with a share price that has recently doubled from around $25 to just below $50, is Qunar Cayman Islands Ltd (QUNR) the next internet list business that is poised to deliver huge profits?
Understanding the Business
Qunar Cayman Islands Ltd (QUNR) has taken a proven business model and applied it to one of the most attractive growth markets in the world. The proven business model is being a provider of lists, or a list “aggregator” that collects travel, hotel, flight and package tour deals from a range of internet sites.
The attractive growth market is the Peoples Republic of China. The citizens of China have been growing wealthier over the last decade or more, to the point that many are now able to afford travel for the first time. The interesting part is that the population have been rapid adopters of the internet, meaning that they are far more comfortable with searching for travel deals and services online, rather than the traditional path of consulting with a travel agent.
The company was launched in 2005, and rapidly gained popularity as Chinese internet users realized that they could find better deals online by visiting the website. The company now generates a large proportion of their traffic from a dedicated mobile site and app. Qunar is also a fully owned subsidiary of Baidu Holdings, which has been described as “the Google of China”.
Metrics and Measures
Qunar Cayman Islands Ltd (QUNR) recently reported quarterly results that stunned the market and sent shares rocketing up while options trading advisory services and market watchers also sat up and took notice.
The total revenues of the company for the fourth quarter were $83.8 million, which were more than double the previous year. The real growth area for revenue was the mobile services division, which reported revenues of $41.5 million. This performance was 400% higher than the previous year, which showed the market that the investment in mobile technology and platform services had well and truly paid off.
The closely watched total estimated flight ticket and hotel room night volumes were also up by between 61% and 107% for the year, which showed that visitors to the website and app of Qunar were buying more tickets and room nights from the portal.
For the full year, the numbers were highly impressive, with revenues for 2014 coming in at $283 million, with the rate of revenue growth accelerating as the year went on.
The Investment Case
The investment case for Qunar Cayman Islands Ltd (QUNR) is attractive, but also high risk. The company has yet to post a profit, as all revenues are re-invested into the company to attract more browsers and improve the user experience through technology upgrades.
The reason for this high level of reinvestment is that the global travel market is an incredibly competitive one, with industry giants like Expedia, Booking.com, TripAdvisor and Agoda all established and profitable. In addition, all of these companies see the potential that Chinese consumers offer in the future through increased travel spending in the long term.
The challenge for Qunar will be attracting and maintaining a large enough audience that they can slowly transition to a profitable business model while still competing effectively against established players as well as any new competitors who might pop up in coming years.
However, if they can establish a dominant market position in China, history has shown that the market leader is incredibly difficult to displace, with buyers and travel providers preferring to stick with the “number 1” portal. If this happens, not only will Qunar be profitable, it will be able to maintain this profitability for years.
Qunar Cayman Islands Ltd (QUNR) recently came to the attention of the market andoptions trading advisory services by reporting amazing results that showed that their strategic decisions had begun paying off. As a company, they are exposed to favorable trends including increased internet penetration in China, growing travel spending and a proven business model.
To identify stocks like Qunar and make profitable trades on their share price movements, it helps to be a subscriber to a high quality and regular options advisory newsletter like Financial Markets Wizard.