3 Stocks Pushing The Internet Industry Lower

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The Internet industry as a whole closed the day down 0.5% versus the S&P 500, which was up 0.2%. Laggards within the Internet industry included LookSmart ( LOOK), down 2.4%, Geeknet ( GKNT), down 2.3%, Taomee Holdings ( TAOM), down 2.2%, TheStreet ( TST), down 2.0% and Net Element ( NETE), down 3.5%.

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

Taomee Holdings ( TAOM) is one of the companies that pushed the Internet industry lower today. Taomee Holdings was down $0.11 (2.2%) to $4.80 on light volume. Throughout the day, 1,932 shares of Taomee Holdings exchanged hands as compared to its average daily volume of 26,300 shares. The stock ranged in price between $4.80-$4.90 after having opened the day at $4.90 as compared to the previous trading day's close of $4.91.

Taomee Holdings Limited operates as a children's entertainment and media company in the People's Republic of China. It operates through two segments, Online Business and Offline Business. Taomee Holdings has a market cap of $174.4 million and is part of the technology sector. Shares are down 2.8% year-to-date as of the close of trading on Tuesday. Currently there are no analysts who rate Taomee Holdings a buy, no analysts rate it a sell, and 1 rates it a hold.

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TheStreet Ratings rates Taomee Holdings as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from TheStreet Ratings analysis on TAOM go as follows:

  • The revenue growth came in higher than the industry average of 11.6%. Since the same quarter one year prior, revenues rose by 22.6%. 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.
  • TAOM has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.76, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for TAOMEE HOLDINGS LTD -ADR is currently very high, coming in at 75.13%. Regardless of TAOM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TAOM's net profit margin of 3.91% is significantly lower than the industry average.
  • 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 Software industry. The net income has significantly decreased by 48.3% when compared to the same quarter one year ago, falling from $0.96 million to $0.50 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. Compared to other companies in the Software industry and the overall market, TAOMEE HOLDINGS LTD -ADR's return on equity significantly trails that of both the industry average and the S&P 500.

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

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At the close, Geeknet ( GKNT) was down $0.27 (2.3%) to $11.25 on heavy volume. Throughout the day, 15,674 shares of Geeknet exchanged hands as compared to its average daily volume of 10,400 shares. The stock ranged in price between $11.23-$11.63 after having opened the day at $11.55 as compared to the previous trading day's close of $11.52.

Geeknet, Inc., through its subsidiary, ThinkGeek, Inc., operates as an online retailer for the global geek community in the United States. Geeknet has a market cap of $77.2 million and is part of the technology sector. Shares are down 36.5% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates Geeknet a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Geeknet as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from TheStreet Ratings analysis on GKNT go as follows:

  • 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 & Catalog Retail industry and the overall market, GEEKNET INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for GEEKNET INC is rather low; currently it is at 18.24%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -9.89% is significantly below that of the industry average.
  • Net operating cash flow has decreased to -$8.63 million or 44.82% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • GKNT has underperformed the S&P 500 Index, declining 24.57% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • GEEKNET INC's earnings per share improvement from the most recent quarter was slightly positive. 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, GEEKNET INC swung to a loss, reporting -$0.03 versus $0.26 in the prior year. For the next year, the market is expecting a contraction of 1500.0% in earnings (-$0.48 versus -$0.03).

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

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LookSmart ( LOOK) was another company that pushed the Internet industry lower today. LookSmart was down $0.04 (2.4%) to $1.65 on light volume. Throughout the day, 2,400 shares of LookSmart exchanged hands as compared to its average daily volume of 16,700 shares. The stock ranged in price between $1.65-$1.72 after having opened the day at $1.69 as compared to the previous trading day's close of $1.69.

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 $9.5 million and is part of the technology sector. Shares are down 17.6% year-to-date as of the close of trading on Tuesday.

TheStreet Ratings rates LookSmart as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity and generally disappointing historical performance in the stock itself.

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Highlights from TheStreet Ratings analysis on LOOK 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 30.1% when compared to the same quarter one year ago, falling from -$1.46 million to -$1.90 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. 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.
  • The share price of LOOKSMART LTD has not done very well: it is down 15.67% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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.
  • LOOKSMART LTD's earnings per share declined by 37.5% 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, LOOKSMART LTD continued to lose money by earning -$0.93 versus -$1.92 in the prior year.
  • The revenue fell significantly faster than the industry average of 19.9%. Since the same quarter one year prior, revenues fell by 47.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.

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

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