Barbarian At The Gate: 500.com (WBAI)

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.

Trade-Ideas LLC identified 500.com ( WBAI) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified 500.com as such a stock due to the following factors:

  • WBAI has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $50.8 million.
  • WBAI has traded 2.6 million shares today.
  • WBAI traded in a range 231.1% of the normal price range with a price range of $4.51.
  • WBAI traded above its daily resistance level (quality: 218 days, meaning that the stock is crossing a resistance level set by the last 218 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on WBAI:

500.com Limited provides online sports lottery services in the People's Republic of China. It operates as an aggregator and processor of lottery purchase orders from its registered user accounts. WBAI has a PE ratio of 38. Currently there is 1 analyst that rates 500.com a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for 500.com has been 2.0 million shares per day over the past 30 days. 500.com has a market cap of $896.5 million and is part of the services sector and leisure industry. Shares are up 47.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates 500.com as a sell. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself, deteriorating net income and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.39%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 300.00% compared to the year-earlier quarter. 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, WBAI is still more expensive than most of the other companies 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 Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 289.6% when compared to the same quarter one year ago, falling from $4.43 million to -$8.40 million.
  • 500.COM LTD -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. 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, 500.COM LTD -ADR increased its bottom line by earning $0.70 versus $0.51 in the prior year. For the next year, the market is expecting a contraction of 12.4% in earnings ($0.61 versus $0.70).
  • The gross profit margin for 500.COM LTD -ADR is currently very high, coming in at 87.48%. Regardless of WBAI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WBAI's net profit margin of -52.65% significantly underperformed when compared to the industry average.
  • In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, 500.COM LTD -ADR's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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