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Why Youku Tudou (YOKU) Stock Is Falling Today

NEW YORK (TheStreet) -- Youku Tudou Inc. (YOKU) is down 6.84% to $25.61 as it continues to fall after news the China-base online television company's TV drama viewership for the first quarter fell significantly.

A report from T.H Capital analysts shows Youku's average daily viewers for the period between Jan. 1, 2014 and March 25, 2014 were 25 million, down from 56 million in the fourth quarter of 2013.

The firm also believes daily views for Youku's in-house professional content did not see a significant growth of 41.3 million from 35.4 million.

Youku is still struggling to buy the rights of numerous popular Chinese TV dramas as it continues to compete against other online TV streaming platforms such as Baidu (BIDU), Sohu (SOHU) and Tencent (TCEHY).

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TheStreet Ratings team rates YOUKU TUDOU INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate YOUKU TUDOU INC (YOKU) 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and feeble growth in the company's earnings per share."

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

  • The revenue growth greatly exceeded the industry average of 16.3%. Since the same quarter one year prior, revenues rose by 47.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • YOKU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.33, which clearly demonstrates the ability to cover short-term cash needs.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, YOUKU TUDOU INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for YOUKU TUDOU INC is currently lower than what is desirable, coming in at 27.85%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -3.31% is significantly below that of the industry average.
  • You can view the full analysis from the report here: YOKU Ratings Report

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