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.

The Internet industry as a whole closed the day up 0.3% versus the S&P 500, which was up 0.7%. Laggards within the Internet industry included Rediff.com India ( REDF), down 3.4%, Selectica ( SLTC), down 3.1%, Net Element ( NETE), down 12.5%, Wowo ( WOWO), down 1.7% and Tremor Video ( TRMR), down 2.1%.

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

Net Element ( NETE) is one of the companies that pushed the Internet industry lower today. Net Element was down $0.02 (12.5%) to $0.14 on average volume. Throughout the day, 916,102 shares of Net Element exchanged hands as compared to its average daily volume of 694,300 shares. The stock ranged in price between $0.14-$0.17 after having opened the day at $0.16 as compared to the previous trading day's close of $0.16.

Net Element, Inc., a global payments-as-a-service, operates as a technology provider with an integrated mobile and transactional services platform serving emerging market clients. Net Element has a market cap of $7.9 million and is part of the technology sector. Shares are down 85.8% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates Net Element a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Net Element as a sell. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, weak operating cash flow, poor profit margins and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on NETE go as follows:

  • The debt-to-equity ratio of 1.18 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, NETE has a quick ratio of 0.61, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has significantly decreased to -$0.17 million or 122.32% 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 NET ELEMENT INC is rather low; currently it is at 16.71%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, NETE's net profit margin of -40.41% significantly underperformed when compared to the industry average.
  • NETE'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 91.63%, 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.
  • Compared to other companies in the Internet Software & Services industry and the overall market, NET ELEMENT 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: Net Element Ratings Report

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At the close, Selectica ( SLTC) was down $0.14 (3.1%) to $4.37 on heavy volume. Throughout the day, 34,448 shares of Selectica exchanged hands as compared to its average daily volume of 14,600 shares. The stock ranged in price between $4.37-$4.61 after having opened the day at $4.53 as compared to the previous trading day's close of $4.51.

Selectica, Inc. provides enterprise contract management, supply management, and configuration solutions. Selectica has a market cap of $42.8 million and is part of the technology sector. Shares are down 12.9% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates Selectica a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Selectica as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on SLTC 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 34.2% when compared to the same quarter one year ago, falling from -$3.17 million to -$4.25 million.
  • Net operating cash flow has significantly decreased to -$3.45 million or 107.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • SLTC has underperformed the S&P 500 Index, declining 20.14% from its price level of one year ago. 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.
  • 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 Software & Services industry and the overall market, SELECTICA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • SLTC's debt-to-equity ratio of 0.74 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.91 is weak.

You can view the full analysis from the report here: Selectica Ratings Report

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Rediff.com India ( REDF) was another company that pushed the Internet industry lower today. Rediff.com India was down $0.06 (3.4%) to $1.72 on average volume. Throughout the day, 20,593 shares of Rediff.com India exchanged hands as compared to its average daily volume of 25,200 shares. The stock ranged in price between $1.66-$1.80 after having opened the day at $1.66 as compared to the previous trading day's close of $1.78.

Rediff.com India has a market cap of $48.3 million and is part of the technology sector. Shares are down 9.6% year-to-date as of the close of trading on Tuesday.

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