3 Stocks Pushing The Technology Sector 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 Technology sector as a whole closed the day down 0.5% versus the S&P 500, which was down 0.9%. Laggards within the Technology sector included Qualstar ( QBAK), down 4.8%, Vicon Industries ( VII), down 4.0%, Electro-Sensors ( ELSE), down 3.0%, ChinaNet Online Holdings ( CNET), down 3.9% and Tel Instrument Electronics ( TIK), down 2.0%.

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

Telefonica ( TEF) is one of the companies that pushed the Technology sector lower today. Telefonica was down $0.50 (3.1%) to $15.60 on average volume. Throughout the day, 1,313,446 shares of Telefonica exchanged hands as compared to its average daily volume of 989,100 shares. The stock ranged in price between $15.54-$15.74 after having opened the day at $15.74 as compared to the previous trading day's close of $16.10.

Telefonica, S.A. provides fixed and mobile communication services primarily in Europe and Latin America. The company offers mobile voice, mobile data and Internet, wholesale, corporate, roaming, fixed wireless, and trunking and paging services. Telefonica has a market cap of $73.5 billion and is part of the telecommunications industry. Shares are down 1.5% year-to-date as of the close of trading on Monday. Currently there are no analysts who rate Telefonica a buy, 1 analyst rates it a sell, and 1 rates it a hold.

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TheStreet Ratings rates Telefonica as a hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, notable return on equity and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and poor profit margins.

Highlights from TheStreet Ratings analysis on TEF go as follows:

  • 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. Compared to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, TELEFONICA SA has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • Although TEF's debt-to-equity ratio of 2.61 is very high, it is currently less than that of the industry average. Along with the unfavorable debt-to-equity ratio, TEF maintains a poor quick ratio of 0.72, which illustrates the inability to avoid short-term cash problems.
  • The gross profit margin for TELEFONICA SA is currently lower than what is desirable, coming in at 30.12%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 5.65% trails that of the industry average.

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

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At the close, ChinaNet Online Holdings ( CNET) was down $0.03 (3.9%) to $0.64 on average volume. Throughout the day, 34,996 shares of ChinaNet Online Holdings exchanged hands as compared to its average daily volume of 31,300 shares. The stock ranged in price between $0.64-$0.66 after having opened the day at $0.66 as compared to the previous trading day's close of $0.67.

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 $15.0 million and is part of the telecommunications industry. Shares are down 20.7% year-to-date as of the close of trading on Monday.

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TheStreet Ratings rates ChinaNet Online Holdings as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and weak operating cash flow.

Highlights from TheStreet Ratings analysis on CNET go as follows:

  • CHINANET ONLINE HOLDINGS's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. The company has reported a trend of declining earnings per share over the past two years. During the past fiscal year, CHINANET ONLINE HOLDINGS swung to a loss, reporting -$0.01 versus $0.13 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 Media industry. The net income has significantly decreased by 2326.7% when compared to the same quarter one year ago, falling from $0.03 million to -$0.67 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Media industry and the overall market, CHINANET ONLINE HOLDINGS's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for CHINANET ONLINE HOLDINGS is currently lower than what is desirable, coming in at 26.26%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -12.88% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$1.35 million or 213.45% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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

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Qualstar ( QBAK) was another company that pushed the Technology sector lower today. Qualstar was down $0.06 (4.8%) to $1.20 on light volume. Throughout the day, 546 shares of Qualstar exchanged hands as compared to its average daily volume of 11,500 shares. The stock ranged in price between $1.20-$1.27 after having opened the day at $1.27 as compared to the previous trading day's close of $1.26.

Qualstar Corporation designs, develops, manufactures, and sells power supplies and data storage systems worldwide. The company operates in two segments, Power Supplies and Tape Libraries. Qualstar has a market cap of $14.7 million and is part of the telecommunications industry. Shares are up 11.5% year-to-date as of the close of trading on Monday.

TheStreet Ratings rates Qualstar as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

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Highlights from TheStreet Ratings analysis on QBAK go as follows:

  • 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 Computers & Peripherals industry and the overall market, QUALSTAR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$2.61 million or 191.49% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • QBAK has underperformed the S&P 500 Index, declining 11.49% 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.
  • QUALSTAR CORP has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, QUALSTAR CORP reported poor results of -$0.85 versus -$0.35 in the prior year.
  • The revenue fell significantly faster than the industry average of 8.9%. Since the same quarter one year prior, revenues fell by 24.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

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

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