How Will China Telecom (CHA) Stock Response To Its Microsoft (MSFT) Xbox One Deal?

NEW YORK (TheStreet) -- China Telecom Corp. (CHA) will begin selling Microsoft's MSFT Xbox One gaming console in China starting in September through an exclusive contract, according to the telecommunications company.

The launch date and price have not yet been decided, a China Telecom spokesman told Reuters.

Shares of China Telecom closed up 3.07% to $54.81 yesterday.

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TheStreet Ratings team rates CHINA TELECOM CORP LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHINA TELECOM CORP LTD (CHA) 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, reasonable valuation levels and compelling growth in net income. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good."

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

  • The revenue growth came in higher than the industry average of 3.5%. Since the same quarter one year prior, revenues rose by 18.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.40, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.21 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • CHINA TELECOM CORP LTD has improved earnings per share by 24.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CHINA TELECOM CORP LTD increased its bottom line by earning $3.58 versus $2.96 in the prior year. For the next year, the market is expecting a contraction of 3.4% in earnings ($3.46 versus $3.58).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Diversified Telecommunication Services industry and the overall market, CHINA TELECOM CORP LTD's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: CHA Ratings Report

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