These Four Chinese Web Stocks are Dropping Today

NEW YORK (TheStreet) -- Chinese web stocks SouFun Holdings (SFUN), Youku Tudou (YOKU), Sina Corp (SINA) and Qihoo 360 Technology (QIHU) dropped during Thursday's session, just some of the losers in a sell-off on U.S.-listed, China-based stocks.

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 deliberately failing to give regulators 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 early afternoon, online real estate portal SouFun Holdings had plunged 8.2% to $87.06, internet TV provider Youku shed 4.8% to $31.40, social network Sina tumbled 5.7% to $72.66, and anti-virus software provider Qihoo dove 4% to $92.05.

TheStreet Ratings team rates SOUFUN HLDGS LTD as a Buy with a ratings score of B+. The team has this to say about their recommendation:

"We rate SOUFUN HLDGS LTD (SFUN) 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, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

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 45.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 100.00% and other important driving factors, this stock has surged by 219.43% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SFUN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • SOUFUN HLDGS LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. 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, SOUFUN HLDGS LTD increased its bottom line by earning $1.87 versus $1.23 in the prior year. This year, the market expects an improvement in earnings ($3.34 versus $1.87).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 108.9% when compared to the same quarter one year prior, rising from $49.17 million to $102.74 million.
  • The gross profit margin for SOUFUN HLDGS LTD is currently very high, coming in at 86.10%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 55.52% significantly outperformed against the industry average.

TheStreet Ratings team rates YOUKU TUDOU INC as a Hold with a ratings score of C-. The 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 solid stock price performance. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."

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

  • YOKU's very impressive revenue growth greatly exceeded the industry average of 9.1%. Since the same quarter one year prior, revenues leaped by 73.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in 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 3.21, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for YOUKU TUDOU INC is rather high; currently it is at 51.27%. Regardless of YOKU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YOKU's net profit margin of -25.49% significantly underperformed when compared to the industry average.
  • 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 Internet Software & Services industry. The net income has significantly decreased by 140.4% when compared to the same quarter one year ago, falling from -$14.93 million to -$35.88 million.
  • 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.

TheStreet Ratings team rates SINA CORP as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate SINA CORP (SINA) 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 growth in earnings per share. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

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

  • The revenue growth came in higher than the industry average of 9.1%. Since the same quarter one year prior, revenues rose by 21.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SINA 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 4.02, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for SINA CORP is rather high; currently it is at 63.82%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 13.74% trails the industry average.
  • Powered by its strong earnings growth of 164.28% and other important driving factors, this stock has surged by 48.28% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • 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, SINA CORP's return on equity significantly trails that of both the industry average and the S&P 500.

TheStreet Ratings team rates QIHOO 360 TECHNOLGY CO -ADR as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate QIHOO 360 TECHNOLGY CO -ADR (QIHU) 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, impressive record of earnings per share growth and compelling growth in net income. 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:

  • QIHU's very impressive revenue growth greatly exceeded the industry average of 9.1%. Since the same quarter one year prior, revenues leaped by 123.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • QIHOO 360 TECHNOLGY CO -ADR reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, QIHOO 360 TECHNOLGY CO -ADR increased its bottom line by earning $0.40 versus $0.12 in the prior year. This year, the market expects an improvement in earnings ($1.44 versus $0.40).
  • QIHU's debt-to-equity ratio of 0.94 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 5.97 is very high and demonstrates very strong liquidity.
  • The gross profit margin for QIHOO 360 TECHNOLGY CO -ADR is currently very high, coming in at 92.25%. Regardless of QIHU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, QIHU's net profit margin of 23.65% compares favorably to the industry average.
  • Powered by its strong earnings growth of 209.09% and other important driving factors, this stock has surged by 199.21% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.

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