Why 58.com, Inc. Shares Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese online classified ad company 58.com, Inc.  plunged 10% today after its quarterly results and outlook disappointed Wall Street.

So what: The stock has soared since its Halloween IPO on high expectations, but today's Q3 results -- EPS of $11 missed Wall Street estimates by $0.02 -- coupled with in-line guidance, are prompting analysts to scale back their growth estimates. While revenue soared 78% during the quarter thanks largely to a 73% jump in paying merchant members, the stock was priced for even more after yesterday's big pop.

Now what: Management now sees Q4 revenue of $41 million to $43 million -- representing a year-over-year jump of 66% to 74% -- which is pretty much in line with expectations. "We will continue to invest aggressively and work diligently to improve our competitive advantage in China's massive local services market," Chairman and CEO Michael Yao said in a statement. With 58.com still up about 100% from its IPO price of $17, and trading at a price-to-sales of 20, I'd wait for an even wider margin of safety before betting on it.

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The article Why 58.com, Inc. Shares Plunged originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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