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TheStreet Open House

These Five Chinese Web Stocks Plummeted on Thursday

NEW YORK (TheStreet) -- Chinese web stocks Baidu (BIDU), E-Commerce China Dangdang (DANG), Qunar Cayman Islands (QUNR), YY Inc (YY) and Ctrip.com (CTRP) were hammered during Thursday's session.

Earlier in the day, Securities and Exchange Commission Administrative Law Judge Cameron Elliot ruled Chinese units of accounting firms KPMG, Deloitte & Touche, PricewaterhouseCoopers and Ernst and Young were barred from auditing U.S.-listed companies for six months. The ruling was in connection to the firms' violation of the Sarbanes-Oxley Act after deliberately failing to provide audit papers for Chinese companies investigated for accounting fraud. The firms said they plan to file an appeal against the ruling.

Also hurting stocks, Chinese manufacturing data contracted for the first time in six months. China January PMI shrank to 49.6 from the previous month's 50.5.

By late afternoon, Baidu had plunged 6.7% to $162.81, Dangdang had taken off 10.6% to $9.91, Qunar Cayman was 7.6% lower to $25.83, YY had dropped 7.4% to $63.81, and Ctrip.com had given up 2.6% to $41.95.

TheStreet Ratings team rates BAIDU INC as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate BAIDU INC (BIDU) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, growth in earnings per share, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 9.1%. Since the same quarter one year prior, revenues rose by 44.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 57.37% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, BIDU should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • BAIDU INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BAIDU INC increased its bottom line by earning $4.78 versus $3.02 in the prior year. This year, the market expects an improvement in earnings ($30.34 versus $4.78).
  • The gross profit margin for BAIDU INC is rather high; currently it is at 69.53%. Regardless of BIDU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BIDU's net profit margin of 34.28% significantly outperformed against the industry.
  • Despite currently having a low debt-to-equity ratio of 0.51, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 5.37 is very high and demonstrates very strong liquidity.

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