Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Facebook Inc (FB),, Inc. (ADR) (BIDU): Will Renren Inc (RENN) Ever Make Money?

Next Monday, Renren Inc (NYSE:RENN) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

With its social network inevitably raising comparisons to American counterpart Facebook Inc (NASDAQ:FB), Renren has plenty of promise in the budding emerging market. Yet unlike the American social-media giant, Renren Inc (NYSE:RENN) isn’t profitable, and despite its strong growth, it doesn’t appear likely to become profitable anytime soon. Let’s take an early look at what’s been happening with Renren over the past quarter and what we’re likely to see in its report.

Stats on Renren

Analyst EPS Estimate ($0.07)
Year-Ago EPS ($0.03)
Revenue Estimate $45.23 million
Change From Year-Ago Revenue 41%
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

Where are Renren’s earnings headed?
In recent months, analysts have downgraded their views on Renren Inc (NYSE:RENN)’s future earnings prospects across the board. They’ve reduced first-quarter estimates by $0.02 per share and widened their 2013 loss projections by $0.05, but even worse, they’ve doubled their 2014 projected losses. All of that pessimism has weighed on the stock, which is down more than 5% since early February.

The problem with comparing Renren to Facebook Inc (NASDAQ:FB) is that Renren isn’t even the biggest player in its own home market. Tencent Holdings and its Pengyou network had almost five times as many engaged users as Renren during 2012, and Renren has rapidly moved toward relying on gaming revenue rather than advertising.

Moreover, even Renren Inc (NYSE:RENN)’s home-field advantage hasn’t produced better stock prices for the company. The Chinese government’s blocking of Facebook naturally helps Renren and fellow domestic giant, Inc. (ADR) (NASDAQ:BIDU), and it appears that political favoritism is likely to keep external players at bay. Yet Renren hasn’t taken advantage of that protectionist advantage to nearly the extent it needs to in order to survive the increasingly competitive Chinese social sector.

Yet one recent step shows that sentiment could be changing. Short interest among Chinese stocks has plunged, with Renren having only about 15% of the shares sold short that it had a year ago and portal/microblog specialist SINA Corp (NASDAQ:SINA) seeing short interest drop 80% from year-ago levels.

In looking at Renren Inc (NYSE:RENN)’s quarterly report, keep in mind that Chinese New Year often depresses results. Strategically, though, the key to Renren’s future is for it to figure out what it wants to be. Right now, with platforms that include its regular social-media offering, its online games, its social-commerce offering, its professional networking service, and its video-sharing business, Renren is trying to do too many things at once. Once it focuses itself, Renren could become a force to be reckoned with in time.

The article Will Renren Ever Make Money? originally appeared on and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Baidu, Facebook, and SINA Corp (NASDAQ:SINA). The Motley Fool owns shares of, Inc. (ADR) (NASDAQ:BIDU)and Facebook.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.