Cutting Rakuten FVE to JPY 950; Concerns Remain Regarding Tough Competition for E-Commerce
We have trimmed our fair value estimate for Rakuten to JPY 950 per share from JPY 1,080 as we now believe the company's operating margin will be lower than our original forecast, owing to larger customer incentives and heavier up-front investment. While we acknowledge the strength of Rakuten’s unique ecosystem, which is a combination of e-commerce and financial businesses and the source of our narrow moat rating, costs necessary to improve the service and retain users in this ecosystem, such as ...Rakuten is mainly engaged in the Internet-related business. Along with its affiliates, Co. operates in two business segments. The Internet Services segment is engaged in the operation of electronic commerce sites, including an Internet shopping mall "Rakuten Ichiba," an online cash back site, a travel booking site, portal sites and digital contents sites; the sale of advertising on Co.'s sites; the provision of messaging and communication services; and the management of a professional baseball team "Tohoku Rakuten Golden Eagles." FinTech segment is engaged in the provision of Internet banking services and online securities trading services, and the credit card and life insurance businesses.
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