3 Stocks Driving The Internet Industry Higher

All three major indices are trading down today with the Dow Jones Industrial Average ( ^DJI) trading down 120.72 points (-0.7%) at 17,420 as of Thursday, Aug. 6, 2015, 4:20 PM ET. The NYSE advances/declines ratio sits at 1,245 issues advancing vs. 1,837 declining with 137 unchanged.

The Internet industry as a whole closed the day down 0.6% versus the S&P 500, which was down 0.8%. Top gainers within the Internet industry included Internet Initiative Japan ( IIJI), up 3.2%, Synacor ( SYNC), up 5.4%, Spark Networks ( LOV), up 2.0%, support.com ( SPRT), up 4.1% and Wowo ( WOWO), up 6.1%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

Spark Networks ( LOV) is one of the companies that pushed the Internet industry higher today. Spark Networks was up $0.06 (2.0%) to $3.11 on heavy volume. Throughout the day, 102,729 shares of Spark Networks exchanged hands as compared to its average daily volume of 65,000 shares. The stock ranged in a price between $2.79-$3.15 after having opened the day at $3.03 as compared to the previous trading day's close of $3.05.

Spark Networks, Inc. provides online personals services in the United States and internationally. It operates in four segments: Jewish Networks, Christian Networks, Other Networks, and Offline and Other Businesses. Spark Networks has a market cap of $80.2 million and is part of the technology sector. Shares are down 15.0% year-to-date as of the close of trading on Wednesday. Currently there are 2 analysts who rate Spark Networks a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Spark Networks as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from TheStreet Ratings analysis on LOV go as follows:

  • LOV 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. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.29, which illustrates the ability to avoid short-term cash problems.
  • 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, SPARK NETWORKS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • 47.38% is the gross profit margin for SPARK NETWORKS INC which we consider to be strong. It has increased significantly from the same period last year. Despite the strong results of the gross profit margin, LOV's net profit margin of 5.36% significantly trails the industry average.
  • LOV, with its decline in revenue, underperformed when compared the industry average of 6.2%. Since the same quarter one year prior, revenues fell by 18.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • LOV'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 49.92%, 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. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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

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At the close, Synacor ( SYNC) was up $0.09 (5.4%) to $1.76 on average volume. Throughout the day, 73,910 shares of Synacor exchanged hands as compared to its average daily volume of 52,700 shares. The stock ranged in a price between $1.63-$1.76 after having opened the day at $1.67 as compared to the previous trading day's close of $1.67.

Synacor, Inc. provides startpages and homescreens, video solutions, identity management services, and various cloud-based services for a range of devices to cable, satellite, telecom, and consumer electronics companies in the United States and Internationally. Synacor has a market cap of $44.1 million and is part of the technology sector. Shares are down 16.5% year-to-date as of the close of trading on Wednesday. Currently there are no analysts who rate Synacor a buy, no analysts rate it a sell, and 1 rates it a hold.

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TheStreet Ratings rates Synacor as a sell. 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 TheStreet Ratings analysis on SYNC go as follows:

  • 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 Software & Services industry and the overall market, SYNACOR INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • SYNC'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 34.82%, 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.
  • SYNACOR INC has improved earnings per share by 42.9% in the most recent quarter compared to 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, SYNACOR INC reported poor results of -$0.46 versus -$0.04 in the prior year. This year, the market expects an improvement in earnings (-$0.18 versus -$0.46).
  • 46.12% is the gross profit margin for SYNACOR 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 -4.01% is in-line with the industry average.
  • Net operating cash flow has significantly increased by 285.67% to $2.17 million when compared to the same quarter last year. In addition, SYNACOR INC has also vastly surpassed the industry average cash flow growth rate of 18.32%.

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

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Internet Initiative Japan ( IIJI) was another company that pushed the Internet industry higher today. Internet Initiative Japan was up $0.30 (3.2%) to $9.75 on average volume. Throughout the day, 1,970 shares of Internet Initiative Japan exchanged hands as compared to its average daily volume of 2,000 shares. The stock ranged in a price between $9.55-$9.86 after having opened the day at $9.55 as compared to the previous trading day's close of $9.45.

Internet Initiative Japan Inc., together with its subsidiaries, offers Internet connectivity, WAN, outsourcing, systems integration, and equipment sales services primarily in Japan. It operates through two segments, Network Services and Systems Integration Business, and ATM Operation Business. Internet Initiative Japan has a market cap of $870.1 million and is part of the technology sector. Shares are down 5.5% year-to-date as of the close of trading on Wednesday. Currently there are no analysts who rate Internet Initiative Japan a buy, no analysts rate it a sell, and 2 rate it a hold.

TheStreet Ratings rates Internet Initiative Japan as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. 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 TheStreet Ratings analysis on IIJI go as follows:

  • Although IIJI's debt-to-equity ratio of 0.27 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.28, which illustrates the ability to avoid short-term cash problems.
  • IIJI, with its decline in revenue, underperformed when compared the industry average of 6.2%. Since the same quarter one year prior, revenues slightly dropped by 9.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The gross profit margin for INTERNET INITIATIVE JAPAN INC is rather low; currently it is at 22.96%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 2.86% significantly trails the industry average.
  • Net operating cash flow has decreased to $24.10 million or 21.91% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

You can view the full analysis from the report here: Internet Initiative Japan Ratings Report

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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.

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