NetEase Inc (NTES): Today's Featured Internet Laggard

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NetEase ( NTES) pushed the Internet industry lower today making it today's featured Internet laggard. The industry as a whole closed the day up 0.4%. By the end of trading, NetEase fell 83 cents (-1.5%) to $54.17 on average volume. Throughout the day, 734,616 shares of NetEase exchanged hands as compared to its average daily volume of 848,500 shares. The stock ranged in price between $54.13-$56.15 after having opened the day at $56.15 as compared to the previous trading day's close of $55. Other companies within the Internet industry that declined today were: LookSmart ( LOOK), down 7.5%, Kayak Software Corp Class A ( KYAK), down 4.6%, Earthlink ( ELNK), down 4.4%, and CafePress ( PRSS), down 4.1%.
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NetEase, Inc., through its subsidiaries, engages in online games, Internet portal, and wireless value-added services businesses in China. It operates an online community and offers Chinese language content and services. NetEase has a market cap of $7.3 billion and is part of the technology sector. The company has a P/E ratio of 14.2, below the average internet industry P/E ratio of 17.5 and below the S&P 500 P/E ratio of 17.7. Shares are up 24.4% year to date as of the close of trading on Tuesday. Currently there are nine analysts that rate NetEase a buy, no analysts rate it a sell, and six rate it a hold.

TheStreet Ratings rates NetEase as a buy. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

On the positive front, Local ( LOCM), up 19.3%, LiveDeal ( LIVE), up 9%, Friendfinder Networks ( FFN), up 5%, and Rediff.com India ( REDF), up 4.6%, were all gainers within the internet industry with Yahoo ( YHOO) being today's featured internet industry leader.

For investors not wanting singular stock exposure, ETFs may be of interest. Investors who are bullish on the internet industry could consider First Trust Dow Jones Internet Idx ( FDN) while those bearish on the internet industry could consider ProShares Ultra Short Technology ( REW).

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