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 up 0.3% versus the S&P 500, which was unchanged. Laggards within the Internet industry included Internet Initiative Japan ( IIJI), down 1.7%, Selectica ( SLTC), down 5.6%, Local ( LOCM), down 2.6%, CafePress ( PRSS), down 3.3% and Jiayuan.com International ( DATE), down 3.1%.

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

Local ( LOCM) is one of the companies that pushed the Internet industry lower today. Local was down $0.04 (2.6%) to $1.70 on light volume. Throughout the day, 19,923 shares of Local exchanged hands as compared to its average daily volume of 74,300 shares. The stock ranged in price between $1.67-$1.80 after having opened the day at $1.75 as compared to the previous trading day's close of $1.75.

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 $40.5 million and is part of the technology sector. Shares are up 10.2% year-to-date as of the close of trading on Monday. 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. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally disappointing historical performance in the stock itself.

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 share price of LOCAL CORP has not done very well: it is down 9.96% 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.
  • 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.
  • LOCM, with its decline in revenue, underperformed when compared the industry average of 27.5%. 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

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At the close, Selectica ( SLTC) was down $0.34 (5.6%) to $5.66 on heavy volume. Throughout the day, 34,248 shares of Selectica exchanged hands as compared to its average daily volume of 6,700 shares. The stock ranged in price between $5.31-$5.83 after having opened the day at $5.83 as compared to the previous trading day's close of $6.00.

Selectica, Inc. provides cloud-based software solutions for companies in the United States, Canada, India, New Zealand, Switzerland, and the United Kingdom. Selectica has a market cap of $37.7 million and is part of the technology sector. Shares are down 8.8% year-to-date as of the close of trading on Monday. Currently there is 1 analyst who rates Selectica a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Selectica as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on SLTC 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 decreased by 21.8% when compared to the same quarter one year ago, dropping from -$2.42 million to -$2.95 million.
  • SLTC has underperformed the S&P 500 Index, declining 9.45% from its price level of one year ago. 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.
  • The debt-to-equity ratio of 1.34 is relatively high when compared with the industry average, suggesting a need for better debt level management. Even though the debt-to-equity ratio is weak, SLTC's quick ratio is somewhat strong at 1.16, demonstrating the ability to handle short-term liquidity needs.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, SELECTICA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • 42.85% is the gross profit margin for SELECTICA INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, SLTC's net profit margin of -78.36% significantly underperformed when compared to the industry average.

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

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Internet Initiative Japan ( IIJI) was another company that pushed the Internet industry lower today. Internet Initiative Japan was down $0.16 (1.7%) to $9.44 on heavy volume. Throughout the day, 11,783 shares of Internet Initiative Japan exchanged hands as compared to its average daily volume of 3,700 shares. The stock ranged in price between $9.31-$9.47 after having opened the day at $9.47 as compared to the previous trading day's close of $9.60.

Internet Initiative Japan Inc., together with its subsidiaries, offers Internet connectivity, WAN, outsourcing, and systems integration services primarily in Japan. The company operates in two segments: Network Services and Systems Integration Business, and ATM Operation Business. Internet Initiative Japan has a market cap of $801.9 million and is part of the technology sector. Shares are down 28.2% year-to-date as of the close of trading on Monday. Currently there is 1 analyst who rates Internet Initiative Japan a buy, no analysts rate it a sell, and 1 rates it a hold.

TheStreet Ratings rates Internet Initiative Japan as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and good cash flow from operations. 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.

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Highlights from TheStreet Ratings analysis on IIJI go as follows:

  • IIJI's revenue growth trails the industry average of 27.5%. Since the same quarter one year prior, revenues slightly increased by 2.1%. 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.
  • Despite currently having a low debt-to-equity ratio of 0.31, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.20 is sturdy.
  • 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. When compared to other companies in the Internet Software & Services industry and the overall market, INTERNET INITIATIVE JAPAN INC's return on equity is below that of both the industry average and the S&P 500.
  • The gross profit margin for INTERNET INITIATIVE JAPAN INC is currently lower than what is desirable, coming in at 26.53%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.78% significantly trails the industry average.

You can view the full analysis from the report here: Internet Initiative Japan 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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