This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Will Facebook Frenzy Fizzle for China Internet Stocks?

Stocks in this article: RENN DANG YOKU

Shares of DANG, mislabeled as the "Amazon of China," have now roughly doubled in the past month, despite several negative developments which may significantly impact earnings. The raging price war between DANG, TaoBao and 360Buy.com has intensified according to articles in the Chinese press. Each party continues to cut prices and the others continue to match. The price war was cited as the reason why DANG swung to a Q3 loss last year, significantly impacting the stock price. And now it's getting worse. Revenues are almost certain to grow substantially in Q4 (perhaps exceeding guidance), but it is almost absolutely certain that the net loss will widen substantially due to price cuts.

A second negative development in Q4 was a data leak involving 12 million DANG customers. In China, electronic payments have been slower to catch on and DANG often transacts on a "cash on delivery" basis. Data thieves would actually find out what product a customer had ordered, show up at their house and deliver a cheap substitute and then collect the cash and leave. When the real delivery showed up later, both the customer and the delivery person had a bit of a surprise. So far, DANG isn't providing reimbursement, and customer backlash has been significant.

Some of these stocks, notably DANG, RENN and YOKU look like they are set up to keep flying higher for some time due to the Facebook frenzy. Many investors will be tempted to go on a quick ride, and it could be possible to make a quick buck in the next few days if the stocks don't immediately pull back. However at some point in time, it could be a few days or a few weeks, these stocks will have to trade at a valuation which reflects their results and not simply the hype for Facebook.

Despite its convenient nickname, RENN is not Facebook. Not by a very long shot. However, valuing the company at just cash per share was certainly too cheap in December. $5 is probably not unfair for a company with this much cash, but it still remains to be seen how quickly RENN is burning the cash and what it plans to do with it. The fact that RENN never bought back shares when it was trading at cash value gives a bit of insight into management's views for RENN's prospects.

2 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs