Why ChinaNet Online (CNET) Stock Is Jumping Today

NEW YORK (TheStreet) --Shares of ChinaNet Online Holdings Inc. (CNET) are climbing higher by 81.32% to $1.18 on very heavy trading volume on Tuesday afternoon, after the company announced it signed a $26 million collaboration agreement with Baidu Inc. (BIDU).

So far, 2.13 million shares of ChinaNet exchanged hands as compared to its average daily volume of 29.70K shares. 

ChinaNet, an Internet technology company that focuses on providing online-to-offline sales channel expansion services for small and medium sized enterprises, said it signed a one-year agreement with Baidu to “optimize the search advertising campaigns run on behalf of ChinaNet’s clients through Baidu’s search engine.”

The company also said that through the agreement it will be able "to provide additional value-added services for its SME clients, which should translate into incremental revenues over time."

Separately, TheStreet Ratings team rates CHINANET ONLINE HOLDINGS as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHINANET ONLINE HOLDINGS (CNET) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. 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 the analysis by TheStreet Ratings Team goes 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: CNET Ratings Report
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