UPDATE: Credit Suisse Initiates Coverage on SouFun on Great Potential Upside

In a report published Friday, Credit Suisse analyst Dick Wei initiated coverage on SouFun (NYSE: SFUN) with an Outperform rating and $87.00 price target.

In the report, Credit Suisse noted, “We initiate coverage of SouFun with an OUTPERFORM rating and target price of US$87, implying a potential upside of 36.5%. Our main valuation methodology is forward P/E. Our target price of US$87 implies 21.0x FY14E and 16.5x FY15E diluted adjusted EPS. The company has a strong cash position of US$294 mn (US$3.5 per diluted share) in 3Q13. We expect a demographic tailwind to propel increasing online usage in the real estate segment in the coming years. The usage shift shall gradually migrate real estate marketing, sales and consumer spending dollars from offline to online. We see SouFun as the biggest beneficiary of this dollar migration as the leading real estate vertical and service solution site in China. We estimate total available marketing size for SouFun to be US$8.7 bn.”

SouFun closed on Thursday at $63.70.