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Citi and Deutsche Bank Initiate Coverage on Qutoutiao; Both Issue "Lukewarm" Ratings

A week ago, Deutsche Bank Securities started coverage on Qutoutiao with a similar "Hold" rating with $8.30 in target price.

Shirley Tian
    Oct 18, 2018 5:54 PM  PT
Citi and Deutsche Bank Initiate Coverage on Qutoutiao; Both Issue "Lukewarm" Ratings

Citigroup announced that it initiated coverage on Qutoutiao Inc. (Nasdaq: QTT) in a research note published today with a "Neutral" rating and an $8.40 per share price target.

A week ago, Deutsche Bank Securities started coverage on Qutoutiao with a similar "Hold" rating and an $8.30 target price.

"While we believe the evolving business model is an attraction to the business, it also acts as a double-edged sword as there may be greater execution risk from short operating history," said Han Joon Kim, Deutsche Bank analyst. "We believe current market cap captures the realistic opportunity available in the next twelve months."

Qutoutiao, which operates as a mobile-only service, is an online content aggregator with a focus on lower-tier cities. It sends customized news feeds to users based on their search results and generates revenue by providing advertising services. The app spreads content from different online sources and media partners, including the People's Daily news agency, Beijing Times, and Hexun.com. It then repackages the articles into customized newsfeeds based on users' past reading patterns and through the use of artificial intelligence.

In particular, the company aims its content strategically to users from smaller cities and rural areas "because of the enormous opportunities in this underserved market," it said in a filing with the Securities and Exchange Commission.

The Shanghai-based company is still far from being profitable. Qutoutiao recorded a loss of $77.7 million in the first six months this year, and management expects the company will continue to incur losses as it looks to expand its customer base. 

Citigroup, Deutsche Bank Securities were underwriters on Qutoutiao's IPO. 

Shares of Qutoutiao rocked Wall Street in its debut last month, skyrocketing to $17 per share on the first trading day.

The stock closed down more than 3 percent today to $7.80 per share in New York. 

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Stock performance of Qutoutiao since IPO

(Source: Thomson Reuters Eikon)


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