In a new report, Morgan Stanley analyst Ben Lin updated the firm’s projections for 58.com Inc (ADR) WUBA 4.49% based on the most recent economic numbers out of China. Despite scaling back many of its financial estimates, the firm upgraded the Chinese online classified market company from Underweight to Overweight based on its long-term growth potential.

Significant Forecast Reduction

Much of the reduction in Morgan Stanley’s earnings expectations for the next two years comes as a result of the company’s acquisition of a 43 percent stake in rival Ganja earlier this year. Morgan Stanley is now calling for a pro-forma core business loss of $190 million in fiscal 2015 and new business investment of $250 million through 2016.

The firm is still predicting staggering growth numbers from 58.com, including 55 percent compound annual revenue growth over the next three years and net margins of 15–20 percent. In addition, Lin predicts that the business will return to profitability within a year.

DCF Analysis

58.com’s stock has…

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