3 Stocks Pushing The Internet Industry 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 Internet industry as a whole closed the day down 0.8% versus the S&P 500, which was down 0.2%. Laggards within the Internet industry included Professional Diversity Network ( IPDN), down 1.9%, Geeknet ( GKNT), down 2.6%, ChinaNet Online Holdings ( CNET), down 4.1%, Taomee Holdings ( TAOM), down 2.1% and Local ( LOCM), down 3.5%.

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

ChinaNet Online Holdings ( CNET) is one of the companies that pushed the Internet industry lower today. ChinaNet Online Holdings was down $0.04 (4.1%) to $0.88 on average volume. Throughout the day, 130,064 shares of ChinaNet Online Holdings exchanged hands as compared to its average daily volume of 127,400 shares. The stock ranged in price between $0.86-$0.93 after having opened the day at $0.89 as compared to the previous trading day's close of $0.92.

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 $22.4 million and is part of the technology sector. Shares are up 9.5% year-to-date as of the close of trading on Wednesday.

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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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At the close, Geeknet ( GKNT) was down $0.30 (2.6%) to $11.01 on average volume. Throughout the day, 11,343 shares of Geeknet exchanged hands as compared to its average daily volume of 10,200 shares. The stock ranged in price between $11.00-$11.49 after having opened the day at $11.49 as compared to the previous trading day's close of $11.31.

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 $74.6 million and is part of the technology sector. Shares are down 37.5% year-to-date as of the close of trading on Wednesday. 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's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 30.21%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. 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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Professional Diversity Network ( IPDN) was another company that pushed the Internet industry lower today. Professional Diversity Network was down $0.10 (1.9%) to $5.27 on light volume. Throughout the day, 3,310 shares of Professional Diversity Network exchanged hands as compared to its average daily volume of 5,800 shares. The stock ranged in price between $5.25-$5.27 after having opened the day at $5.25 as compared to the previous trading day's close of $5.37.

Professional Diversity Network, Inc. operates online professional networking communities with career resources in the United States. Professional Diversity Network has a market cap of $34.5 million and is part of the technology sector. Shares are up 16.5% year-to-date as of the close of trading on Wednesday. Currently there is 1 analyst who rates Professional Diversity Network a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Professional Diversity Network as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity and weak operating cash flow.

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Highlights from TheStreet Ratings analysis on IPDN 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 Internet Software & Services industry and the overall market, PROFESSIONAL DIVERSITY NETWK'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 -$0.35 million or 138.51% 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 gross profit margin for PROFESSIONAL DIVERSITY NETWK is currently very high, coming in at 70.44%. Regardless of IPDN's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, IPDN's net profit margin of -21.24% significantly underperformed when compared to the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Regardless of the rise in share value over the previous year, we feel that the risks involved in investing in this stock do not compensate for any future upside potential.
  • PROFESSIONAL DIVERSITY NETWK reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PROFESSIONAL DIVERSITY NETWK swung to a loss, reporting -$0.23 versus $0.27 in the prior year. This year, the market expects an improvement in earnings (-$0.19 versus -$0.23).

You can view the full analysis from the report here: Professional Diversity Network Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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