Youku Tudou (YOKU) Stock Slumping as China Stocks Fall

NEW YORK (TheStreet) --Shares of Youku Tudou (YOKU) are down by 9.86% to $24.69 in late afternoon trading on Friday, as some China-based stocks decline today as China's stock market tumbles.

Youku Tudou is a China-based Internet TV company.

Shares prices in China saw one of the sharpest sell offs in years, The New York Times reports.

For months analysts have issued warnings about a stock market bubble in China, where what The Times describes as "giddy" investors drove up stock prices by acquiring shares on margin, or with funds borrowed from brokers.

The latest drop in the Chinese market comes as authorities move to stiffen the rules on buying stock with borrowed money, The Times noted.

Other China-based stocks falling today include SINA Corp. (SINA), down by 4.32% to $54.04, Baidu Inc. (BIDU), lower by 1.93% to $203.54, and Sohu.com Inc. (SOHU), slipping by 6.82% to $60.03 this afternoon.

Separately, TheStreet Ratings team rates YOUKU TUDOU INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate YOUKU TUDOU INC (YOKU) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. 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 the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 5.9%. Since the same quarter one year prior, revenues rose by 47.5%. 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.
  • Although YOKU's debt-to-equity ratio of 0.09 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 2.78, which clearly demonstrates the ability to cover short-term cash needs.
  • 44.49% is the gross profit margin for YOUKU TUDOU INC which we consider to be strong. Regardless of YOKU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YOKU's net profit margin of -45.41% significantly underperformed when compared to the industry average.
  • 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 194.8% when compared to the same quarter one year ago, falling from -$28.32 million to -$83.47 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 Software & Services industry and the overall market, YOUKU TUDOU 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: YOKU Ratings Report

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