Zulily and 7 Other Internet Retailer Stocks to Sell Right Now

NEW YORK (TheStreet) -- Online retail is booming, but just because sales are trending higher, doesn't mean all stocks are, too.

The so-called Internet and catalog retailing industry encompasses more than 16,000 companies. Sales are shifting from catalog stores to Internet retailers. Amazon (AMZN) and Overstock (OSTK) are two successful examples of how the industry has evolved, according to TheStreet Ratings.

"The evolution of secure user interfaces and the increased convenience of online shopping are expected to drive growth in the coming quarters," according to TheStreet Ratings. "Although the broader retail industry is expected to remain sluggish during the slow recovery from the U.S. economic slowdown, the Internet will help drive sales."

That said "the next phase of e-commerce growth will require retailers to innovate and invest in technologies that optimize the connection between online and offline elements," TheStreet Ratings said. Additionally, any failure to address cybersecurity risks, credit card fraud and other consumer fraud could hurt sales.

Not all online retailers are getting it right though. The list below notes companies whose growth prospects aren't as strong or those that have deteriorating profit margins, with shares suffering as a result.

One good example is Zulily, a daily deals Web site that has seen its share price fall because of lower sales and slow customer growth. The company is a recommended "sell" by TheStreet Ratings, despite e-commerce giant Alibaba (BABAamassing a 9% stake in a bid to further expand out of China.

The stocks on this list are Internet retailers, rated "sell" with a D+ or worse rating. Find out which stocks to sell and when you're done, be sure to check out which Internet software and services companies to add to your portfolio.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year. Note: Year-to-date returns are based on May 13, 2015 closing prices.

DANG Chart DANG data by YCharts

8. E-Commerce China Dangdang Inc. (DANG) (ADR)
Market Cap: $752 million
Rating: Sell, D+
Year-to-date return: -1.6%

E-Commerce China Dangdang Inc. operates as a business-to-consumer e-commerce company in the People's Republic of China. It primarily sells books, periodicals, electronic publications, consumer electronics, and audio-visual products through its Website dangdang.com.

"We rate E-COMMERCE CH DANGDANG -ADR (DANG) a SELL. This is driven by some concerns, 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 generally disappointing historical performance in the stock itself and poor profit margins."

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

  • DANG has underperformed the S&P 500 Index, declining 6.68% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The gross profit margin for E-COMMERCE CH DANGDANG -ADR is rather low; currently it is at 17.67%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 1.30% is above that of the industry average.
  • E-COMMERCE CH DANGDANG -ADR reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, E-COMMERCE CH DANGDANG -ADR turned its bottom line around by earning $0.17 versus -$0.30 in the prior year. For the next year, the market is expecting a contraction of 2.9% in earnings ($0.17 versus $0.17).
  • DANG 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. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.38 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • 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 & Catalog Retail industry and the overall market on the basis of return on equity, E-COMMERCE CH DANGDANG -ADR has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

 

FTD Chart FTD data by YCharts

7. FTD Companies Inc. (FTD)
Market Cap: $833 million
Rating: Sell, D
Year-to-date return: -19.6%

FTD Companies, Inc., through its subsidiaries, operates as a floral and gifting company primarily in the United States, Canada, the United Kingdom, and the Republic of Ireland. The company operates through four segments: Consumer, Florist, International, and Provide Commerce.

"We rate FTD COMPANIES INC (FTD) a SELL. This is driven by a few notable 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 generally disappointing historical performance in the stock itself and unimpressive growth in net income."

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

  • The share price of FTD COMPANIES INC has not done very well: it is down 6.89% 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. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • 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 78.8% when compared to the same quarter one year ago, falling from $9.62 million to $2.03 million.
  • FTD COMPANIES 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 reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FTD COMPANIES INC turned its bottom line around by earning $1.17 versus -$0.12 in the prior year. This year, the market expects an improvement in earnings ($1.81 versus $1.17).
  • Compared to other companies in the Internet & Catalog Retail industry and the overall market on the basis of return on equity, FTD COMPANIES INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • 37.17% is the gross profit margin for FTD COMPANIES INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 0.55% trails the industry average.

 

GKNT Chart GKNT data by YCharts

6. Geeknet Inc. (GKNT)
Market Cap: $54.2 million
Rating: Sell, D
Year-to-date return: -2.8%

Geeknet, Inc., through its subsidiaries, operates as an online retailer for the global geek community in the United States. It operates through two segments, Website and Wholesale.

"We rate GEEKNET INC (GKNT) a SELL. This is driven by multiple 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 deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes 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 & Catalog Retail industry. The net income has significantly decreased by 80.9% when compared to the same quarter one year ago, falling from $5.07 million to $0.97 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 & 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 18.09%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 1.33% is above 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 39.12%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 81.57% 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.
  • 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. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, GEEKNET INC reported poor results of -$1.24 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings (-$0.71 versus -$1.24).

 

LITB Chart LITB data by YCharts

5. LightInTheBox Holding Co. (LITB)
Market Cap: $224 million
Rating: Sell, D
Year-to-date return: -25.4%

LightInTheBox Holding Co., Ltd., through its subsidiaries, operates as an online retail company.

"We rate LIGHTINTHEBOX HLDG -ADR (LITB) a SELL. This is driven by a few notable 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 deteriorating net income, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Internet & Catalog Retail industry. The net income has significantly decreased by 56.5% when compared to the same quarter one year ago, falling from -$5.64 million to -$8.83 million.
  • The share price of LIGHTINTHEBOX HLDG -ADR has not done very well: it is down 8.00% 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.
  • LIGHTINTHEBOX HLDG -ADR's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, LIGHTINTHEBOX HLDG -ADR reported poor results of -$0.61 versus -$0.16 in the prior year. This year, the market expects an improvement in earnings (-$0.58 versus -$0.61).
  • 35.65% is the gross profit margin for LIGHTINTHEBOX HLDG -ADR which we consider to be strong. Regardless of LITB's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -7.87% trails the industry average.
  • Compared to other companies in the Internet & Catalog Retail industry and the overall market, LIGHTINTHEBOX HLDG -ADR's return on equity significantly trails that of both the industry average and the S&P 500.

 

PRSS Chart PRSS data by YCharts

4. CafePress Inc. (PRSS)
Market Cap: $76.2 million
Rating: Sell, D
Year-to-date return: 84.6%

CafePress Inc. operates an e-commerce platform enabling customers to shop, create, and sell various customized and personalized products worldwide. The company offers its products through its website, CafePress.com.

"We rate CAFEPRESS INC (PRSS) a SELL. This is driven by some concerns, 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 disappointing return on equity and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes 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, CAFEPRESS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • PRSS'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 31.22%, 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. 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.
  • PRSS, with its decline in revenue, underperformed when compared the industry average of 19.8%. Since the same quarter one year prior, revenues slightly dropped by 8.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • 40.17% is the gross profit margin for CAFEPRESS INC which we consider to be strong. Regardless of PRSS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.29% trails the industry average.
  • Net operating cash flow has slightly increased to $20.55 million or 8.97% when compared to the same quarter last year. Despite an increase in cash flow, CAFEPRESS INC's cash flow growth rate is still lower than the industry average growth rate of 57.95%.

 

PRTS Chart PRTS data by YCharts

3. U.S. Auto Parts Network Inc. (PRTS)
Market Cap: $69.7 million
Rating: Sell, D
Year-to-date return: -11.9%

U.S. Auto Parts Network, Inc., together with its subsidiaries, operates as an online retailer of automotive aftermarket parts and accessories primarily in the United States, Canada, and the Philippines. The company operates through two segments, Base USAP and AutoMD.

"We rate US AUTO PARTS NETWORK INC (PRTS) a SELL. This is driven by some concerns, 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 unimpressive growth in net income, generally high debt management risk, 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:

  • 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 81.6% when compared to the same quarter one year ago, falling from -$1.33 million to -$2.41 million.
  • The debt-to-equity ratio of 1.07 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.24, which clearly demonstrates the inability to cover short-term cash needs.
  • The gross profit margin for US AUTO PARTS NETWORK INC is currently lower than what is desirable, coming in at 27.40%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -3.40% trails that of the industry average.
  • Net operating cash flow has significantly decreased to $0.53 million or 80.86% 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 31.78%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 75.00% 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.

 

QUNR Chart QUNR data by YCharts

2. Qunar Cayman Islands Limited (QUNR)
Market Cap: $5.6 billion
Rating: Sell, D
Year-to-date return: 64.3%

Qunar Cayman Islands Limited operates an online travel commerce platform in the People's Republic of China.

"We rate QUNAR CAYMAN ISLANDS -ADR (QUNR) a SELL. This is driven by multiple 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 deteriorating net income and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes 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 & Catalog Retail industry. The net income has significantly decreased by 434.3% when compared to the same quarter one year ago, falling from -$20.20 million to -$107.92 million.
  • QUNAR CAYMAN ISLANDS -ADR 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. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, QUNAR CAYMAN ISLANDS -ADR reported poor results of -$2.53 versus -$0.24 in the prior year. This year, the market expects an improvement in earnings (-$1.38 versus -$2.53).
  • The gross profit margin for QUNAR CAYMAN ISLANDS -ADR is currently very high, coming in at 77.27%. Regardless of QUNR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, QUNR's net profit margin of -130.04% significantly underperformed when compared to the industry average.
  • Compared to its closing price of one year ago, QUNR's share price has jumped by 98.13%, exceeding the performance of the broader market during that same time frame. Regarding the future course of this stock, we feel that the risks involved in investing in QUNR do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • QUNR's very impressive revenue growth greatly exceeded the industry average of 19.4%. Since the same quarter one year prior, revenues leaped by 95.1%. 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.

 

ZU Chart ZU data by YCharts

1. Zulily (ZU)
Market Cap: $1.7 billion
Rating: Sell, D-
Year-to-date return: -41.5%

Zulily, inc. operates as an online retailer in the United States, Canada, Australia, the United

Kingdom, and internationally. The company provides merchandise to moms purchasing for their children, themselves, and their homes.

"We rate ZULILY INC (ZU) a SELL. This is driven by some concerns, 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 generally disappointing historical performance in the stock itself, weak operating cash flow and poor profit margins."

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

  • ZU'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 63.45%, which is also worse than the performance of the S&P 500 Index. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, ZU is still more expensive than most of the other companies in its industry.
  • Net operating cash flow has significantly decreased to -$19.18 million or 210.16% 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 ZULILY INC is currently lower than what is desirable, coming in at 31.54%. Regardless of ZU's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.81% trails the industry average.
  • When compared to other companies in the Internet & Catalog Retail industry and the overall market, ZULILY INC's return on equity is below that of both the industry average and the S&P 500.
  • ZULILY INC reported flat earnings per share in the most recent quarter. 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, ZULILY INC increased its bottom line by earning $0.11 versus $0.08 in the prior year. This year, the market expects an improvement in earnings ($0.25 versus $0.11).

 

 

 

 

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