3 Stocks Pushing The Internet Industry Lower

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.

The Internet industry as a whole closed the day down 0.1% versus the S&P 500, which was up 0.1%. Laggards within the Internet industry included ChinaNet Online Holdings ( CNET), down 2.6%, Geeknet ( GKNT), down 1.5%, Taomee Holdings ( TAOM), down 2.3%, QuinStreet ( QNST), down 2.5% and support.com ( SPRT), down 1.7%.

TheStreet Ratings Group would like to highlight 3 stocks that pushed the industry lower today:

Taomee Holdings ( TAOM) is one of the companies that pushed the Internet industry lower today. Taomee Holdings was down $0.12 (2.3%) to $5.03 on light volume. Throughout the day, 34,389 shares of Taomee Holdings exchanged hands as compared to its average daily volume of 99,600 shares. The stock ranged in price between $4.93-$5.13 after having opened the day at $5.12 as compared to the previous trading day's close of $5.15.

Taomee Holdings Limited operates as a children's entertainment and media company in the People's Republic of China. It operates through two segments, Online Business and Offline Business. Taomee Holdings has a market cap of $189.4 million and is part of the technology sector. Shares are up 2.0% year-to-date as of the close of trading on Monday. Currently there are no analysts who rate Taomee Holdings a buy, no analysts rate it a sell, and 1 rates it a hold.

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TheStreet Ratings rates Taomee Holdings as a buy. 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, reasonable valuation levels, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from TheStreet Ratings analysis on TAOM go as follows:

  • The revenue growth greatly exceeded the industry average of 6.4%. Since the same quarter one year prior, revenues rose by 43.4%. 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.
  • TAOM 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 4.18, which clearly demonstrates the ability to cover short-term cash needs.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • TAOMEE HOLDINGS LTD -ADR's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, TAOMEE HOLDINGS LTD -ADR reported lower earnings of $0.15 versus $0.23 in the prior year. This year, the market expects an improvement in earnings ($0.20 versus $0.15).

You can view the full analysis from the report here: Taomee Holdings Ratings Report

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At the close, Geeknet ( GKNT) was down $0.21 (1.5%) to $13.69 on light volume. Throughout the day, 9,668 shares of Geeknet exchanged hands as compared to its average daily volume of 16,600 shares. The stock ranged in price between $13.51-$13.88 after having opened the day at $13.82 as compared to the previous trading day's close of $13.90.

Geeknet, Inc., through its subsidiary, ThinkGeek, Inc., operates as an online retailer for the global geek community in the United States. Geeknet has a market cap of $92.8 million and is part of the technology sector. Shares are down 23.2% year-to-date as of the close of trading on Monday. Currently there is 1 analyst who rates Geeknet a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Geeknet as a sell. 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 TheStreet Ratings analysis on GKNT go 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 & Catalog Retail industry. The net income has decreased by 16.3% when compared to the same quarter one year ago, dropping from $6.06 million to $5.07 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 & Catalog Retail industry and the overall market, GEEKNET INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $12.61 million or 46.11% 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 GEEKNET INC is rather low; currently it is at 20.37%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 6.81% is above that of the industry average.
  • In its most recent trading session, GKNT has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.

You can view the full analysis from the report here: Geeknet Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

ChinaNet Online Holdings ( CNET) was another company that pushed the Internet industry lower today. ChinaNet Online Holdings was down $0.02 (2.6%) to $0.83 on light volume. Throughout the day, 36,802 shares of ChinaNet Online Holdings exchanged hands as compared to its average daily volume of 265,300 shares. The stock ranged in price between $0.78-$0.87 after having opened the day at $0.87 as compared to the previous trading day's close of $0.85.

ChinaNet Online Holdings, Inc., through its subsidiaries, provides business-to-businesses Internet services for small and medium enterprises (SMEs) sales networks in the People's Republic of China. ChinaNet Online Holdings has a market cap of $17.5 million and is part of the technology sector. Shares are down 7.1% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates ChinaNet Online Holdings as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.

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Highlights from TheStreet Ratings analysis on CNET go as follows:

  • CNET's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CNET has a quick ratio of 1.75, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The revenue fell significantly faster than the industry average of 14.7%. Since the same quarter one year prior, revenues fell by 27.3%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Media industry and the overall market, CHINANET ONLINE HOLDINGS's return on equity is below that of both the industry average and the S&P 500.
  • CHINANET ONLINE HOLDINGS reported flat earnings per share in the most recent quarter. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, CHINANET ONLINE HOLDINGS reported lower earnings of $0.13 versus $0.15 in the prior year.

You can view the full analysis from the report here: ChinaNet Online Holdings Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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