Internet Stocks Float While NASDAQ Sinks

QNET stock chart
Source: QNET Vs Nasdaq by Amigobulls

The weekly movement in the US stock market seemed like a seesaw juggling between bulls and bears. Well, this kind of explains the confused state that investors are currently in.  NASDAQ was down by 0.8% over the week, due to investors’ concerns on the Fed’s tapering the asset-purchasing program. However, despite these concerns, the NASDAQ internet index (QNET Index) outperformed the broader market by more than 1.4%. Wow! Indeed, the US internet stocks had a great second quarter.

As the earnings seasons is almost coming to a close, we turn our attention on deep-diving into the financials of the second quarter. Yet another favorite company of ours, which would be announcing its results on 14th Aug (post-market hours) is NetEase.

Netease (NTES), one of our top stock picks is due to announce its Quarterly results for the June 2013 ending quarter on Thursday. Analyst estimates of Earnings stand at $1.30 per share which, as per our estimates, will prove a bit of a tough hurdle for the company. However, having beaten estimates over the last two quarters and also a strong Q1 growth we do not rule out the chances of the company coming out on top of estimates on Thursday. Follow us to know our take on the Netease quarter of Q2 2013.

Yahoo (YHOO) announced the acquisition of Tumblr in Jun 2013. Tumblr, the popular blogging site, claims over 300 million unique visitors. The company was founded by David Karp in 2007 and is headquartered in New York. Analysts are quite pessimistic about the striking figure of $750.9 million, which would appear in Yahoo’s balance sheet as ‘goodwill’ out of the total deal cost of $990 million. The term ‘Goodwill’ means an intangible asset, which is supposed to give synergy/competitive advantage for the acquiring company. This figure looks quite heavy given Tumblr’s annual revenue of $13 million.

Stock Market Updates For Last Week

Priceline’s (PCLN) (one of our top favorite stocks) revenue increase of 27% YoY accompanied by an earnings jump of 22% YoY re-affirms our conviction. The stock price jumped over 6% in after-market hours following the results announcement.

CoStar Group (CSGP), provider of information, analytics and marketing services to the commercial real estate industry in the US and UK, was recently upgraded by Thomson Reuters from a ‘sell’ rating to a ‘hold’. Prior to this, a few other analysts like SunTrust and Needham had raised the company’s target price on solid grounds of 9 cents earnings beat. On an average, analysts anticipate that CoStar would post an earnings of $2.35 with a consensus price target of $130. The stock is currently trading at a high PE ratio of 264x.

j2Global (JCOM), a company that operates in the field of cloud services and digital media through channels like IGN Entertainment, Ziff Davis, reported a record quarter backed by a strong revenue growth of 58% Y/Y. The company’s Earnings Per Share grew 18.6% to $0.83, beating analysts’ estimates by 4 cents. At this stage, the company looks quite attractive given its low valuation, consistent growth and a record second quarter (in several aspects). We amigos have decided to add this company to our positive watch list.

Rackspace Hosting (RAX), a company that offers a host of cloud computing services to business enterprises, posted a ‘not so profitable’ second quarter results although revenues witnessed an increase of 18% Y/Y. Prior to earnings release, the company’s stock price touched its 2-week low; and after trading hours state a probable upside of 11.7%. We hold a pessimistic view given its high P/E ratio and declining profitability.

Rackspace PE ratio
Source: Rackspace PE ratio by Amigobulls
Rackspace EPS
Source: Rackspace EPS by Amigobulls
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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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