On Friday, Citi adjusted its stance on shares of Autohome Inc. (NYSE: ATHM), moving its rating from Buy to Neutral and reducing the price target to $28 from the former $31. The revision comes as the firm anticipates the company's second-quarter revenue for 2024 to be slightly below expectations, with adjusted earnings projected to align with the consensus.
Autohome, which is expected to release its second-quarter financial results on July 31, 2024, may see a 2% decrease in revenue estimates according to Citi.
This downward revision is attributed to a more significant impact than initially anticipated from a price war among original equipment manufacturers (OEMs) on advertising revenue and the used car business. This trend could potentially worsen in the third quarter of 2024, though there are indications that the price war may ease by the fourth quarter.
Citi also forecasts a sequential decline in margins for the latter half of 2024, as high-margin advertising revenues contract. Reflecting a more muted fundamental outlook, Citi has lowered its earnings estimates for Autohome for the years 2024, 2025, and 2026 by 7%, 14%, and 13% respectively.
Despite the less than exciting outlook, Citi notes that a 6.4% dividend yield is likely to support the share price. Autohome has committed to distributing no less than 1.5 billion RMB in dividends annually from 2024 to 2026. This commitment could provide a cushion for the stock price amidst the company's adjusting financial projections.
In other recent news, Autohome reported a steady growth in its Q1 2024 financial results. The company's total revenue increased by 4.9% year-over-year, reaching RMB 1.61 billion, while the adjusted net income grew by 2.2% to RMB 494 million. Autohome also highlighted plans to continue paying dividends, aiming for a total annual dividend of no less than RMB 1.5 billion from 2024 to 2026.
In addition, Autohome is focusing on expanding innovative businesses and strengthening collaboration with Ping An Group. The company plans to capitalize on recent auto policies in China to enhance its platform services. Despite the new car price war affecting the used car business, Autohome's NEV and digital products businesses remain key revenue drivers.
These developments come as Autohome maintains a robust balance sheet with cash and short-term investments totaling RMB 23.65 billion.
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