Youku Tudou (YOKU) Stock Falls After Mizuho Securities Downgrade

NEW YORK (TheStreet) -- Shares of Youku Tudou (YOKU) were falling 2.5% to $23.99 Monday after analyst firm Mizuho Securities downgraded the Chinese Internet company.

In a note to investors, Mizuho downgraded Youku Tudou to "neutral" from "underperform," according to Benzinga. The analyst firm maintained its price target of $18 for the company.

Mizuho analyst Jin Yoon said the company doesn't seem to be an attractive candidate for a "going private" offer or a takeover target due to its "asset-light nature and loss-making operations."

Yoon wrote, "In addition, if investors consider the USD30.5b price at which Alibaba invested in Youku one year ago as the benchmark price, without a privatization or takeout offer, we believe there is significant downside risk to the stock."

Youku Tudou owns and operates an online video service in China.

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.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • 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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