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Why Sky-Mobi (MOBI) Is Still a "Hold"

NEW YORK (TheStreet) -- Sky-Mobi (MOBI) has been reiterated as a "hold" with a ratings score of C, according to TheStreet Ratings team.

The China-based mobile app store dropped over Monday's session. By market close, shares had taken off 8.3% to $9.17. Trading volume of 1.4 million was nearly triple its three-month daily average. 

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TheStreet Ratings Team has this to say about their recommendation:

"We rate SKY-MOBI LTD -ADR (MOBI) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, compelling growth in net income and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

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

  • Compared to its closing price of one year ago, MOBI's share price has jumped by 302.63%, exceeding the performance of the broader market during that same time frame. Although MOBI had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 38.1% when compared to the same quarter one year prior, rising from $0.58 million to $0.80 million.
  • MOBI, with its decline in revenue, underperformed when compared the industry average of 10.1%. Since the same quarter one year prior, revenues fell by 18.9%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to the other companies in the Software industry and the overall market, SKY-MOBI LTD -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The gross profit margin for SKY-MOBI LTD -ADR is rather low; currently it is at 23.60%. It has decreased significantly from the same period last year. Along with this, the net profit margin of 4.10% significantly trails the industry average.

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