3 Stocks Pushing The Internet Industry Lower

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The Internet industry as a whole closed the day down 0.9% versus the S&P 500, which was down 0.5%. Laggards within the Internet industry included LookSmart ( LOOK), down 3.6%, Selectica ( SLTC), down 4.5%, Internet Initiative Japan ( IIJI), down 3.5%, Sify Technologies ( SIFY), down 3.0% and TechTarget ( TTGT), down 4.3%.

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

Internet Initiative Japan ( IIJI) is one of the companies that pushed the Internet industry lower today. Internet Initiative Japan was down $0.42 (3.5%) to $11.82 on light volume. Throughout the day, 2,784 shares of Internet Initiative Japan exchanged hands as compared to its average daily volume of 8,900 shares. The stock ranged in price between $11.78-$11.87 after having opened the day at $11.86 as compared to the previous trading day's close of $12.24.

Internet Initiative Japan Inc., together with its subsidiaries, offers Internet connectivity, WAN, outsourcing, and systems integration services primarily in Japan. The company operates in two segments: Network Services and Systems Integration Business, and ATM Operation Business. Internet Initiative Japan has a market cap of $1.1 billion and is part of the technology sector. Shares are down 11.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates Internet Initiative Japan as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from TheStreet Ratings analysis on IIJI go as follows:

  • IIJI's revenue growth trails the industry average of 21.3%. Since the same quarter one year prior, revenues slightly increased by 1.5%. 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.
  • Despite currently having a low debt-to-equity ratio of 0.32, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.30 is sturdy.
  • 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 47.4% when compared to the same quarter one year ago, falling from $10.16 million to $5.35 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. When compared to other companies in the Internet Software & Services industry and the overall market, INTERNET INITIATIVE JAPAN INC's return on equity is below that of both the industry average and the S&P 500.

You can view the full analysis from the report here: Internet Initiative Japan Ratings Report

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At the close, Selectica ( SLTC) was down $0.28 (4.5%) to $5.87 on heavy volume. Throughout the day, 24,040 shares of Selectica exchanged hands as compared to its average daily volume of 3,500 shares. The stock ranged in price between $5.87-$6.18 after having opened the day at $6.10 as compared to the previous trading day's close of $6.15.

Selectica, Inc. provides cloud-based software solutions for companies in the United States, Canada, India, New Zealand, Switzerland, and the United Kingdom. Selectica has a market cap of $29.0 million and is part of the technology sector. Shares are down 4.1% year-to-date as of the close of trading on Monday. Currently there is 1 analyst who rates Selectica a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Selectica as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from TheStreet Ratings analysis on SLTC 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 Software & Services industry. The net income has significantly decreased by 100.8% when compared to the same quarter one year ago, falling from -$1.06 million to -$2.12 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, SELECTICA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio is very high at 5.04 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, SLTC's quick ratio is somewhat strong at 1.04, demonstrating the ability to handle short-term liquidity needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 26.83%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 48.64% 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.
  • SELECTICA INC's earnings per share declined by 48.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SELECTICA INC continued to lose money by earning -$1.67 versus -$2.25 in the prior year. For the next year, the market is expecting a contraction of 9.0% in earnings (-$1.82 versus -$1.67).

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

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LookSmart ( LOOK) was another company that pushed the Internet industry lower today. LookSmart was down $0.06 (3.6%) to $1.70 on light volume. Throughout the day, 500 shares of LookSmart exchanged hands as compared to its average daily volume of 4,400 shares. The stock ranged in price between $1.70-$1.70 after having opened the day at $1.70 as compared to the previous trading day's close of $1.76.

LookSmart, Ltd. provides search and display advertising network solutions in the United States, Europe, the Middle East, and Africa. LookSmart has a market cap of $10.2 million and is part of the technology sector. Shares are down 14.1% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates LookSmart as a sell. Among the areas we feel are negative, one of the most important has been a generally disappointing historical performance in the stock itself.

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Highlights from TheStreet Ratings analysis on LOOK go as follows:

  • LOOK has underperformed the S&P 500 Index, declining 7.67% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • 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. Compared to other companies in the Internet Software & Services industry and the overall market, LOOKSMART LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • LOOK, with its very weak revenue results, has greatly underperformed against the industry average of 21.3%. Since the same quarter one year prior, revenues plummeted by 64.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Net operating cash flow has slightly increased to -$1.26 million or 6.52% when compared to the same quarter last year. Despite an increase in cash flow, LOOKSMART LTD's cash flow growth rate is still lower than the industry average growth rate of 23.29%.
  • The gross profit margin for LOOKSMART LTD is rather high; currently it is at 55.73%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -129.71% is in-line with the industry average.

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

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