BEIJING, May 18, 2015 /PRNewswire/ -- In a report published on May 12, 2015, Tuesday, Rosenblatt analysts reiterated their Buy rating on iDreamSky Technology Limited (Nasdaq: DSKY), as well as the price target of $11.

Earnings Preview: Everything on Track, Reiterate Buy

Analysis from the Rosenblatt Securities Team goes as follows:


    --  DSKY will report their Q1 earnings later this month and we believe Q1
        results will be strong due to promotions on several games during the
        Chinese New Year, including Ninja Fruit and Temple Run.
    --  We are slightly adjusting downward our Q2 revenue and EPS estimates due
        to China Mobile's temporary suspension of its billing system in several
        provinces. But we think the several new games launching in Q2 will
        offset some of those negative impacts. We believe China Mobile cracking
        down on illegal games will be positive for DSKY over the long-run.
    --  We have $0.94 and $1.57 EPS estimates for 2015 and 2016, respectively,
        and we are maintaining our $11 price target on DSKY, based on 12x PE of
        2015 EPS and 7x PE of 2016 EPS.

We think that although China Mobile's billing policy on mobile games will temporarily affect Q2 results by around 5-6%, the clean mobile game market will be positive for iDreamSky, as there will be less competition for Ninja Fruit and Temple Run from pirated games. iDreamSky launches several new mobile games in May, which will partially offset China Mobile's billing policy impact. We believe the company still has a strong pipeline for new games launching in the next few months.

We are reducing our revenue and EPS estimates by ~5% for Q2 and maintaining our estimates for Q3 and Q4. We think current annual estimates for 2015 are reasonable. If the company can manage street expectations well, the stock should have some upside from here.

Our conservative valuation on the stock is mostly attributable to uncertainty of margin improvement over the next few quarters. If DSKY's gross margin remains at a 40% level and operating margins continue to improve, we believe there will be upside for the P/E multiple on the stock.


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SOURCE iDreamSky Technology Limited