Why It's Too Late For Youku Tudou

Youku Tudou Inc (ADR) YOKU will step up spending to recover lost market share, but an analyst said Friday the move comes too late for the Chinese online television company.

Youku, which posted disappointing earnings late Thursday, changed hands recently at $14.35, off $0.80. The shares are down about 19 percent year to date.

Youku also disclosed late Thursday that the Securities and Exchange Commission is investigating certain aspects of its past accounting.

Deutsche Bank's Vivian Hao downgraded Youku to Sell and slashed her price target 41 percent to $10.90, saying it's "likely too late" for Youku to regain momentum in China's increasingly competitive market for Internet TV.

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Youku, in which Alibaba Group Holding Ltd BABA has an 18.5 percent stake, had scaled back spending in 2014 with the goal of reaching profitability.

Citing independent research data, Hao said the company's market share has slipped to 22 percent, from 25 percent a year earlier.

Competitors Tencent Holdings TCEHY and iQiyi.com, backed by Baidu Inc (ADR) BIDU, have meanwhile made substantial market inroads, Hao said.

Investors may be underestimating the amount of investing Youku is planning in order to make up lost ground, according to Hao.

Hao didn't comment on the SEC investigation, which Youku said is focused on its accounting policy for deferring revenue recognition as well as so-called barter transactions and licensed content.

Youku expects the SEC investigation will be resolved by the end of April.