Youku Tudou (YOKU) Stock Soars on $3.7 Billion Ailbaba Merger

NEW YORK (TheStreet) -- Youku Tudou  (YOKU) stock is up by 9.52% to $26.69 in early morning trading on Friday, after the company agreed to be acquired by Alibaba (BABA) for roughly $3.7 billion.

Under the terms of the all-cash deal, Alibaba will pay $27.60 per American depositary share to Youku Tudou shareholders.

The price represents a 35.1% premium to the closing price of Youku Tudou's ADS's on October 15, the day before "China's YouTube" first announced it had received a proposal from Alibaba, and a 13% premium to Youku Tudou's closing price on Thursday, the Wall Street Journal notes.

The Chinese e-commerce company had initially offered Youku Tudou $26.60 per share on October 16.

The deal is expected to close during the fiscal 2016 first quarter, after which Youku Tudou CEO Victor Koo will continue to lead the company.

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 good cash flow from operations. 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:

  • YOKU's very impressive revenue growth greatly exceeded the industry average of 15.1%. Since the same quarter one year prior, revenues leaped by 57.1%. 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 0.10 is very low, it is currently higher than that of the industry average. Along with this, the company maintains a quick ratio of 2.52, 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 139.8% when compared to the same quarter one year ago, falling from -$22.99 million to -$55.15 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. 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

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

More from Markets

Nvidia, Applied Materials, SpaceX and PG&E - 5 Things You Must Know

Nvidia, Applied Materials, SpaceX and PG&E - 5 Things You Must Know

Dow Futures Weaken Amid Tech Sector Concerns; Oil Rebounds on OPEC Cut Plans

Dow Futures Weaken Amid Tech Sector Concerns; Oil Rebounds on OPEC Cut Plans

Sears Gets Lifeline For At least One More Christmas; Smart-Speaker Wars -- ICYMI

Sears Gets Lifeline For At least One More Christmas; Smart-Speaker Wars -- ICYMI

Nvidia Shares Tank After Earnings And Revenue Miss, Poor Guidance

Nvidia Shares Tank After Earnings And Revenue Miss, Poor Guidance

Dow Ends Higher, Nasdaq Rises as Tech Stocks Rebound

Dow Ends Higher, Nasdaq Rises as Tech Stocks Rebound