Why 21Vianet (VNET) Stock Is Down Today

NEW YORK (TheStreet) -- 21Vianet (VNET) was falling 7.6% to $24.87 Friday after missing analysts' estimates for earnings in the first quarter.

For the first quarter 21Vianet reported earnings of 8 cents a share, missing the Capital IQ Consensus Estimate of 10 cents a share by 2 cents. Revenue grew 34.4% from the year-ago quarter to $94.3 million. Analysts expected revenue of $93.53 million for the quarter.

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TheStreet Ratings team rates 21VIANET GROUP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate 21VIANET GROUP INC (VNET) 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 robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk."

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

  • The revenue growth came in higher than the industry average of 21.3%. Since the same quarter one year prior, revenues rose by 35.1%. 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.
  • Compared to its closing price of one year ago, VNET's share price has jumped by 172.49%, exceeding the performance of the broader market during that same time frame. Although VNET had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • 37.02% is the gross profit margin for 21VIANET GROUP INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.85% is in-line with the industry average.
  • 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 Software & Services industry and the overall market, 21VIANET GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 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 111.5% when compared to the same quarter one year ago, falling from $6.88 million to -$0.79 million.
  • You can view the full analysis from the report here: VNET 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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