Zhihu Answers Investor Doubts With Improving Margins
Portfolio Pulse from The Bamboo Works
Zhihu Inc. (NYSE:ZH) reported its first-ever revenue decline since its New York listing, with a 3.3% drop in Q1. Despite improving its gross margin by over 5 percentage points, the company's net loss slightly improved, but its adjusted non-GAAP loss widened. Zhihu aims to achieve non-GAAP profitability by year-end. The stock fell 2.5% post-announcement and has lost nearly 40% of its value this year. Comparatively, Baidu (NASDAQ:BIDU) and Reddit (NYSE:RDDT) have higher price-to-sales ratios.

June 13, 2024 | 1:35 pm
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NEUTRAL IMPACT
Baidu, which also hosts user communities similar to Zhihu, trades at a higher price-to-sales ratio of 1.78 compared to Zhihu's 0.58. This indicates a stronger market position and investor confidence in Baidu.
Baidu's higher price-to-sales ratio compared to Zhihu indicates a stronger market position. However, the news primarily focuses on Zhihu, making the impact on Baidu neutral.
CONFIDENCE 80
IMPORTANCE 50
RELEVANCE 30
NEUTRAL IMPACT
Reddit trades at a significantly higher price-to-sales ratio of 11 compared to Zhihu's 0.58, reflecting stronger investor confidence and market position.
Reddit's significantly higher price-to-sales ratio compared to Zhihu indicates stronger investor confidence. However, the news primarily focuses on Zhihu, making the impact on Reddit neutral.
CONFIDENCE 75
IMPORTANCE 40
RELEVANCE 20
NEGATIVE IMPACT
Zhihu reported its first-ever revenue decline since its New York listing, with a 3.3% drop in Q1. Despite improving its gross margin, the company's net loss slightly improved, but its adjusted non-GAAP loss widened. Zhihu aims to achieve non-GAAP profitability by year-end. The stock fell 2.5% post-announcement and has lost nearly 40% of its value this year.
The revenue decline and widening non-GAAP loss are negative indicators, leading to a 2.5% drop in stock price. The company's aim for non-GAAP profitability by year-end is a positive long-term goal but does not mitigate the short-term negative impact.
CONFIDENCE 95
IMPORTANCE 90
RELEVANCE 100