Why Ku6 Media (KUTV) Shares Are Surging Today

NEW YORK (TheStreet) -- Ku6 Media (KUTV) was surging 48.6% to $3.12 Tuesday after a controlling shareholder announced they will sell a 41% stake to Xu Xudong.

Shanda Media, the control shareholder of Ku6 Media, will sell 1,938,360,784 of the media company to Xu. Xu currently owns about 70.5% of Shanda Media, and is the founder of Sky Profit Limited. The aggregate consideration for the sale shares will be based on the lower market price of the company's ADSs during the seven business days before the transaction.

The transaction is expected to complete on April 30.

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TheStreet Ratings team rates KU6 MEDIA CO LTD -ADR as a Sell with a ratings score of D-. TheStreet Ratings Team has this to say about their recommendation:

"We rate KU6 MEDIA CO LTD -ADR (KUTV) a SELL. This is driven by multiple 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 deteriorating net income, disappointing return on equity, weak operating cash flow and poor profit margins."

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

  • 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 decreased by 5.8% when compared to the same quarter one year ago, dropping from -$3.25 million to -$3.44 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, KU6 MEDIA CO LTD -ADR's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$3.86 million or 100.98% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for KU6 MEDIA CO LTD -ADR is currently extremely low, coming in at 14.89%. Regardless of KUTV's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, KUTV's net profit margin of -101.02% significantly underperformed when compared to the industry average.
  • KU6 MEDIA CO LTD -ADR reported flat earnings per share in the most recent quarter. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, KU6 MEDIA CO LTD -ADR continued to lose money by earning -$0.20 versus -$1.26 in the prior year.
  • You can view the full analysis from the report here: KUTV Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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