NEW YORK (TheStreet) -- Shares of AirMedia Group (AMCN) were gaining 55.1% to $3.18 on heavy trading volume Wednesday after the marketing services company announced it sold a 5% equity interest of its advertising business.

AirMedia said Beijing Shengshi Lianhe Advertising, which it controls through contractual arrangements, sold a 5% equity interest in AM Advertising to Shenzen Liontronics for RMB 150 million in cash. The transaction reflects a total valuation of RMB 3 billion for AM Advertising.

Following the transaction AirMedia will restructure AM Advertising. AM Advertising will own and operate AirMedia's media business in airports and billboards and LED media out of the airports. AirMedia will transfer its Wi-Fi, on-train Wi-Fi, digital TV-screens on airplanes, and gas station media network businesses out of AM Advertising as part of the restructuring.

About 7.4 million shares of AirMedia were traded by 10:38 a.m. Wednesday, above the average trading volume of about 115,000 shares a day.

TheStreet Ratings team rates AIRMEDIA GROUP INC -ADS as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

TheStreet Recommends

"We rate AIRMEDIA GROUP INC -ADS (AMCN) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself."

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

  • AIRMEDIA GROUP INC -ADS has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, AIRMEDIA GROUP INC -ADS reported poor results of -$0.44 versus -$0.18 in the prior year. For the next year, the market is expecting a contraction of 22.3% in earnings (-$0.54 versus -$0.44).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Media industry. The net income has significantly decreased by 868.4% when compared to the same quarter one year ago, falling from $1.46 million to -$11.20 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Media industry and the overall market, AIRMEDIA GROUP INC -ADS's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for AIRMEDIA GROUP INC -ADS is currently extremely low, coming in at 11.86%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -17.02% is significantly below that of the industry average.
  • The share price of AIRMEDIA GROUP INC -ADS has not done very well: it is down 18.99% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • You can view the full analysis from the report here: AMCN Ratings Report

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