Credit Suisse Downgrades Autohome To Underperform

Ping An has completed the acquisition of a 47.4 percent stake in Autohome Inc (ADR) (NYSE: ATHM) for $1.6bn from Telstra Corporation Ltd (OTCMKTS: TLSYY), and the new management team has replaced the previous CEO and CFO. Credit Suisse’s Evan Zhou downgraded the rating on Autohome from Neutral to Underperform, while reducing the price target from $31.50 to $18.

More key people from the management team could potentially leave, resulting in Autohome’s business experiencing challenges in the near term, analyst Evan Zhou said. He added that it may take Ping An and the new management team some time to begin further reorganization and integration, and till then Autohome’s financial metrics are likely to underperform Street expectations.

The non-GAAP EPS estimate for 2017 has been reduced by 9 percent. The analyst expects the company’s EPS to decline by 7 percent in 2016 and by 4 percent in 2017, owning to change in management, slowdown in old business and new investments.

Future Of Autohome

Since Ping An already has effective control of Autohome and there are uncertainties in the domestic capital market, so the former may “take a pause,” before any further share acquisition, Zhou believes. He added, “That said, investors should keep in mind that Ping An may still take the company private or introduce other strategic investors at certain time (but more likely at a lower price, in our view).”