One of the fastest growing mobile developers in the world is getting decimated right now
Cheetah Mobile, a Chinese mobile Android app developer, is down 12% in Friday's trading day after a brutal week that saw the company's stock price fall 30%.
The stock fell on slower than expected revenue and user growth as expenses and the cost of revenues climbed. It also guided Q2 revenue estimates lower than Wall Street analysts expected.
"Our analysis suggests that there are three key reasons for the weakness in our expected mobile revenues growth, which is a key driver of our overall growth: 1) a decline in eCPMs from some of our third-party advertising platform partners in the international markets; 2) slower than expected progress in expanding our direct sales force; and 3) longer than expected time for us to execute our content product strategy," said Sheng Fu, Cheetah Mobile's CEO.
And so the downgrades came from across Wall Street. Both Credit Suisse and Macquarie lowered their recommendations on the stock.
"Downgrade to Neutral on slower mobile ad growth and low visibility on the direct sales transition and content product strategy. We cut FY16-17 earnings by 69-70%," Macquarie said in a note following the announcement.
This a rough turnaround for Cheetah. It has grown at a startling rate, with a reported 500 million monthly active users.
"We are the big mobile Internet company now based on our user base," CEO Sheng Fu said at a conference last year, according to VentureBeat.
Still, it's got nothing on what's been said about Cheetah in hedge fund and security research circles. In February Alecto Research released a massive report saying that its products, mostly cleanup and system optimizer apps, don't actually work.
There are also concerns over data security. Here's a bit from research firm, The Capital Forum, on that point:
The apps require extensive access to the devices on which they run, and they are able to harvest a great deal of data about users' interests, demographics and location. Cheetah Mobile's business model is not significantly different from the way in which some major American tech companies such as Facebook monetize their free products. However, Cheetah Mobile is different from American tech companies in that its headquarters are located in China and its data servers are primarily located there as well, and its main business partners are major Chinese tech firms. The Chinese government, according to sources, accesses its companies' data for internal security, economic competitiveness or other purposes. Cheetah Mobile, and similar companies, represents a major point of entry for China to access American app marketplaces and their users to gather information. However, U.S. government officials in national security and intelligence agencies are highly aware of surveillance and hacking both inside and outside China, presumably coming from actors affiliated with the Chinese state.
Cheetah has yet to respond to Business Insider's requests for comment.