Margin Contraction on Domestic EC Is Faster than Anticipated; Cut Rakuten’s FVE to JPY 1,080
While we agree with Rakuten’s strategy to reinforce its ecosystem by investing for: 1) more alliance in e-commerce business; 2) more incentives to encourage subscribers to use multiple services; and 3) acquisition on fintech businesses, we are concerned that margin contraction at the domestic EC business is becoming faster than our forecast, owing to intense competition. The operating margin for the domestic EC business was 16.9% in the March quarter, and after declining for six consecutive quar...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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