Why Youku Tudou (YOKU) Stock Is Gaining Today

NEW YORK (TheStreet) -- Youku Tudou (YOKU) gained 4.4% to $19.87 Wednesday after announcing a $300 million share repurchase program.

The company said it expects to fund the repurchase with its existing cash balance, including cash generated from its operations.

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TheStreet Ratings team rates YOUKU TUDOU INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate YOUKU TUDOU INC (YOKU) a SELL. This is driven by several weaknesses, 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, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."

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

  • YOUKU TUDOU INC's earnings per share declined by 30.0% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, YOUKU TUDOU INC reported poor results of -$0.58 versus -$0.52 in the prior year. For the next year, the market is expecting a contraction of 496.6% in earnings (-$3.46 versus -$0.58).
  • 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 51.3% when compared to the same quarter one year ago, falling from -$17.56 million to -$26.58 million.
  • The gross profit margin for YOUKU TUDOU INC is rather low; currently it is at 21.75%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -17.17% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$24.93 million or 141.47% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of YOUKU TUDOU INC has not done very well: it is down 13.08% 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.
  • You can view the full analysis from the report here: YOKU 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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