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 0.2% versus the S&P 500, which was down 0.2%. Laggards within the Internet industry included Geeknet ( GKNT), down 1.9%, Local ( LOCM), down 2.2%, Net Element ( NETE), down 5.5%, ModusLink Global Solutions ( MLNK), down 3.1% and QuinStreet ( QNST), down 3.0%.

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

QuinStreet ( QNST) is one of the companies that pushed the Internet industry lower today. QuinStreet was down $0.14 (3.0%) to $4.60 on average volume. Throughout the day, 184,957 shares of QuinStreet exchanged hands as compared to its average daily volume of 132,700 shares. The stock ranged in price between $4.57-$4.83 after having opened the day at $4.68 as compared to the previous trading day's close of $4.74.

QuinStreet, Inc., an online performance marketing company, provides customer acquisition programs for its clients in the United States and internationally. The company operates in two segments, Direct Marketing Services (DMS) and Direct Selling Services (DSS). QuinStreet has a market cap of $212.5 million and is part of the technology sector. Shares are down 45.5% year-to-date as of the close of trading on Wednesday. Currently there are no analysts who rate QuinStreet a buy, 1 analyst rates it a sell, and none rate it a hold.

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TheStreet Ratings rates QuinStreet as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on QNST 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 282.1% when compared to the same quarter one year ago, falling from -$1.58 million to -$6.05 million.
  • The gross profit margin for QUINSTREET INC is rather low; currently it is at 19.46%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -8.94% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to $5.09 million or 74.59% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 47.27%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 250.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • 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 Internet Software & Services industry and the overall market, QUINSTREET INC'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: QuinStreet Ratings Report

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At the close, Local ( LOCM) was down $0.04 (2.2%) to $1.74 on heavy volume. Throughout the day, 137,248 shares of Local exchanged hands as compared to its average daily volume of 67,700 shares. The stock ranged in price between $1.74-$1.90 after having opened the day at $1.90 as compared to the previous trading day's close of $1.78.

Local Corporation, a technology and advertising company, provides search results to consumers who search online for local businesses, products, and services in the United States. The company operates in two segments, Paid Search and Daily Deals. Local has a market cap of $39.0 million and is part of the technology sector. Shares are up 12.7% year-to-date as of the close of trading on Wednesday. Currently there are 2 analysts who rate Local a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Local as a sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from TheStreet Ratings analysis on LOCM go as follows:

  • The gross profit margin for LOCAL CORP is currently lower than what is desirable, coming in at 30.76%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.90% is significantly below that of the industry average.
  • 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 Internet Software & Services industry and the overall market, LOCAL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • In its most recent trading session, LOCM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • LOCM, with its decline in revenue, underperformed when compared the industry average of 19.9%. Since the same quarter one year prior, revenues slightly dropped by 0.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • LOCM's debt-to-equity ratio of 0.82 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.75 is weak.

You can view the full analysis from the report here: Local 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.

Geeknet ( GKNT) was another company that pushed the Internet industry lower today. Geeknet was down $0.20 (1.9%) to $10.50 on light volume. Throughout the day, 6,845 shares of Geeknet exchanged hands as compared to its average daily volume of 11,100 shares. The stock ranged in price between $10.41-$10.69 after having opened the day at $10.57 as compared to the previous trading day's close of $10.70.

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 $70.8 million and is part of the technology sector. Shares are down 41.7% 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.

TheStreet Ratings rates Geeknet 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 generally disappointing historical performance in the stock itself.

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

Highlights from TheStreet Ratings analysis on GKNT go as follows:

  • GEEKNET INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue 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).
  • 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 & Catalog Retail industry. The net income has significantly decreased by 171.0% when compared to the same quarter one year ago, falling from -$1.53 million to -$4.15 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 & 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 16.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -17.73% is significantly below that of the industry average.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.37%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 181.81% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

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