Market leadership is all well and good, but if you can't make much real money from it, that leadership really doesn't get you very far over the long term. With Amazon (NASDAQ:AMZN) and Yahoo! Japan (OTCPK:YAHOY) putting pressure on Rakuten (OTCPK:RKUNY) in its core e-commerce business, Rakuten has had to respond with more aggressive marketing and promotions. At the same time, though, management is trying to be more disciplined and more demanding with its numerous ancillary operations, and the company has a credible shot of driving meaningful growth in its credit card business.
Modeling Rakuten offers a few more challenges than normal, as Amazon can be a brutally competitive player. While Rakuten would seem to offer about 10% upside from here on the basis of growth opportunities like Ebates, Viber, and its card business and improving profitability in its core Rakuten e-commerce business (Rakuten Ichiba), bulls need to at least consider the risk that Amazon and Yahoo! Japan compete so aggressively that meaningful profit growth in the core business proves elusive.
Can Rakuten Maintain Leadership ... And Will It Matter?