These Five Chinese Web Stocks Plummeted on Thursday

NEW YORK (TheStreet) -- Chinese web stocks Baidu (BIDU), E-Commerce China Dangdang (DANG), Qunar Cayman Islands (QUNR), YY Inc (YY) and Ctrip.com (CTRP) were hammered during Thursday's session.

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' violation of the Sarbanes-Oxley Act after deliberately failing to provide 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 late afternoon, Baidu had plunged 6.7% to $162.81, Dangdang had taken off 10.6% to $9.91, Qunar Cayman was 7.6% lower to $25.83, YY had dropped 7.4% to $63.81, and Ctrip.com had given up 2.6% to $41.95.

TheStreet Ratings team rates BAIDU INC as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate BAIDU INC (BIDU) 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, growth in earnings per share, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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 44.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 57.37% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, BIDU should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • BAIDU INC's earnings per share improvement from the most recent quarter was slightly positive. 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, BAIDU INC increased its bottom line by earning $4.78 versus $3.02 in the prior year. This year, the market expects an improvement in earnings ($30.34 versus $4.78).
  • The gross profit margin for BAIDU INC is rather high; currently it is at 69.53%. Regardless of BIDU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BIDU's net profit margin of 34.28% significantly outperformed against the industry.
  • Despite currently having a low debt-to-equity ratio of 0.51, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 5.37 is very high and demonstrates very strong liquidity.

TheStreet Ratings team rates E-COMMERCE CH DANGDANG -ADR as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate E-COMMERCE CH DANGDANG -ADR (DANG) a SELL. This is driven by a few notable 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. Among the areas we feel are negative, one of the most important has been poor profit margins."

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

  • The gross profit margin for E-COMMERCE CH DANGDANG -ADR is rather low; currently it is at 18.35%. Regardless of DANG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.82% trails the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market, E-COMMERCE CH DANGDANG -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Internet & Catalog Retail industry average, but is greater than that of the S&P 500. The net income increased by 71.4% when compared to the same quarter one year prior, rising from -$15.92 million to -$4.56 million.
  • E-COMMERCE CH DANGDANG -ADR reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, E-COMMERCE CH DANGDANG -ADR reported poor results of -$0.89 versus -$0.46 in the prior year. This year, the market expects an improvement in earnings (-$0.42 versus -$0.89).
  • DANG 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. Despite the fact that DANG's debt-to-equity ratio is low, the quick ratio, which is currently 0.52, displays a potential problem in covering short-term cash needs.

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

"We rate YY INC -ADR (YY) 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, notable return on equity and robust revenue growth. 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:

  • Powered by its strong earnings growth of 227.27% and other important driving factors, this stock has surged by 423.44% over the past year, outperforming the rise in the S&P 500 Index during the same period.
  • Compared to other companies in the Internet Software & Services industry and the overall market, YY INC -ADR's return on equity exceeds that of both the industry average and the S&P 500.
  • YY 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 3.59, which clearly demonstrates the ability to cover short-term cash needs.
  • 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 275.9% when compared to the same quarter one year prior, rising from $5.63 million to $21.15 million.
  • 49.00% is the gross profit margin for YY INC -ADR which we consider to be strong. Regardless of YY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YY's net profit margin of 26.45% compares favorably to the industry average.

TheStreet Ratings team rates CTRIP.COM INTL LTD as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate CTRIP.COM INTL LTD (CTRP) a BUY. This is driven by some important positives, 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, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

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

  • The revenue growth came in higher than the industry average of 8.0%. Since the same quarter one year prior, revenues rose by 34.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although CTRP's debt-to-equity ratio of 0.21 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.48, which illustrates the ability to avoid short-term cash problems.
  • Powered by its strong earnings growth of 81.81% and other important driving factors, this stock has surged by 69.06% 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, CTRP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The gross profit margin for CTRIP.COM INTL LTD is currently very high, coming in at 75.40%. Regardless of CTRP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CTRP's net profit margin of 24.20% significantly outperformed against the industry.
  • CTRIP.COM INTL LTD reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CTRIP.COM INTL LTD reported lower earnings of $0.80 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.03 versus $0.80).