NEW YORK (TheStreet) -- Intercloud Systems (ICLD) shares are falling, down -7.6% to $4.66 in trading on Tuesday.
The decrease continued following last week's announcement of a class action lawsuit against the telecom infrastructure services provider.
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The lawsuit revolves around favorable articles written by John Mylant, CEO of Options Weekly.org, and an individual referred to as "Kingmaker" that helped drive the price of the stock up.
According to a Seeking Alpha article, John Mylant is a paid promoter who works closely with companies who pay him to write favorable articles about them. The article further alleges that Mylant was paid by Intercloud for positive press coverage.
"The complaint further alleges that on March 13, 2014, an article on Seeking Alpha disclosed that John Mylant was a paid promoter who worked closely with the companies that employed him to publish favorable articles while falsely stating that he was independent of the companies he promoted," said Pomerantz Law Firm which filed suit on Friday.
TheStreet Ratings team rates INTERCLOUD SYSTEMS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate INTERCLOUD SYSTEMS INC (ICLD) a SELL. This is driven by a number of negative factors, 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 and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- INTERCLOUD SYSTEMS INC 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. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, INTERCLOUD SYSTEMS INC swung to a loss, reporting -$6.88 versus $5.00 in the prior year.
- 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 IT Services industry. The net income has significantly decreased by 1228.6% when compared to the same quarter one year ago, falling from $2.06 million to -$23.30 million.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 56.81%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 173.60% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The revenue growth came in higher than the industry average of 20.2%. Since the same quarter one year prior, revenues slightly increased by 4.2%. 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.
- You can view the full analysis from the report here: ICLD Ratings Report