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 1.0% versus the S&P 500, which was down 1.9%. Laggards within the Internet industry included LookSmart ( LOOK), down 6.9%, Internet Initiative Japan ( IIJI), down 3.3%, SMTP ( SMTP), down 2.6%, TheStreet ( TST), down 1.7% and Spark Networks ( LOV), down 2.2%.

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

SMTP ( SMTP) is one of the companies that pushed the Internet industry lower today. SMTP was down $0.16 (2.6%) to $5.91 on average volume. Throughout the day, 8,795 shares of SMTP exchanged hands as compared to its average daily volume of 10,500 shares. The stock ranged in price between $5.91-$6.06 after having opened the day at $5.95 as compared to the previous trading day's close of $6.07.

SMTP, Inc. provides Internet-based services to facilitate email delivery worldwide. It offers services to enable businesses of various scales to outsource the sending of outbound emails. SMTP has a market cap of $33.1 million and is part of the technology sector. Shares are down 0.2% year-to-date as of the close of trading on Friday. Currently there is 1 analyst who rates SMTP a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates SMTP as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from TheStreet Ratings analysis on SMTP go as follows:

  • SMTP's revenue growth trails the industry average of 28.8%. Since the same quarter one year prior, revenues rose by 11.0%. 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.
  • SMTP 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 7.05, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for SMTP INC is currently very high, coming in at 80.99%. Regardless of SMTP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SMTP's net profit margin of -6.00% significantly underperformed when compared to the industry average.
  • SMTP 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. 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, SMTP INC increased its bottom line by earning $0.42 versus $0.35 in the prior year.

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

At the close, Internet Initiative Japan ( IIJI) was down $0.34 (3.3%) to $9.90 on average volume. Throughout the day, 4,786 shares of Internet Initiative Japan exchanged hands as compared to its average daily volume of 3,800 shares. The stock ranged in price between $9.29-$10.08 after having opened the day at $10.08 as compared to the previous trading day's close of $10.24.

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 $918.8 million and is part of the technology sector. Shares are unchanged year-to-date as of the close of trading on Friday. Currently there is 1 analyst who rates Internet Initiative Japan a buy, no analysts rate it a sell, and 1 rates it a hold.

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

TheStreet Ratings rates Internet Initiative Japan as a hold. The company's strengths can be seen in multiple areas, such as its 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 IIJI go as follows:

  • Although IIJI's debt-to-equity ratio of 0.29 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.23, which illustrates the ability to avoid short-term cash problems.
  • The revenue fell significantly faster than the industry average of 28.8%. Since the same quarter one year prior, revenues fell by 13.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 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 35.1% when compared to the same quarter one year ago, falling from $12.82 million to $8.32 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. 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.

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.

LookSmart ( LOOK) was another company that pushed the Internet industry lower today. LookSmart was down $0.06 (6.9%) to $0.80 on heavy volume. Throughout the day, 26,190 shares of LookSmart exchanged hands as compared to its average daily volume of 13,400 shares. The stock ranged in price between $0.77-$0.83 after having opened the day at $0.78 as compared to the previous trading day's close of $0.86.

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 $4.1 million and is part of the technology sector. Shares are unchanged year-to-date as of the close of trading on Friday.

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.

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 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 36.8% when compared to the same quarter one year ago, falling from -$0.95 million to -$1.30 million.
  • 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, LOOKSMART LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 61.98%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 27.77% 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.
  • LOOKSMART LTD's earnings per share declined by 27.8% 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 28.8%. Since the same quarter one year prior, revenues fell by 20.1%. 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

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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