Another Chinese Internet Name to Watch

 | Apr 29, 2013 | 11:04 AM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:






This morning's news that Alibaba was investing in Sina's (SINA) Weibo service (their version of Twitter) caught many people off guard. It shouldn't have.

Sina's Weibo service is still massively popular with over 200 million users. It had been outshone lately, however, by Tencent's WeChat growth, which recently got to 300 million users after being at zero a little over a couple of years ago. What this meant is that either Sina's portal business was being undervalued with Sina's stock at $3.3 billion or Sina's Weibo service had virtually lost all its value. Alibaba apparently thought so because they just bought an 18% stake in Weibo, valuing it at $3.3 billion. Because of the apparent disconnect in pricing by Wall Street, Sina's shares are up this morning by 15%.

Are there other Chinese Internet stocks like Sina that have been languishing but are really interesting jewels waiting to be discovered somehow? The one that jumps out to me is Youku Tudou (YOKU).

Here's why.

Youku is China's leading premium video service. It's sort of a combination of Hulu, HBO Go, and YouTube all in one. They make most of their money on ads before, during and after premium video. They're just barely break even. However, they are the market share leader in China -- by a wide margin -- after merging with the number two player Tudou last year.

Youku's stock price has languished for much of the last two years and has been forgotten about by many investors. That lack of a move in the stock price masks some of the changes that have been going on behind the scenes at Youku. Beyond the merger with Tudou, there have been several small online video competitors in China which have closed because of higher ongoing costs. That increases the market share and profits for Youku.

Is online video a valuable space?  Yes .Are the bigger players like Alibaba, Tencent or Baidu (BIDU) going to want to be in this space or partner with Youku in some way? I think the answer is yes.

The number two player in the online video market is now Baidu's Qiyi service. I think it's just a matter of time before Alibaba or Tencent want to make a play for this space too -- especially since they're both so determined on vying for dominance in the total Chinese Internet space.

I think you want to have a position in Youku. It's already bounced off a recent low of around $16 back to $19. As we move towards the summer, I expect it to go back to around $24 on some improved cost-rationalized earnings.

But, the day they get bought or make some kind of strategic investment, Youku should fly up.

Columnist Conversations

Now that AAPL has violated the shorter term support, these are the two areas I have to consider for new buy en...
The symmetry is holding up in MCD.  Target 1 is 163.34 if we continue to hold above here!  ...
As far as TSLA is concerned, I still have a higher target above the market at the 409 area.  I stated in ...
The TLT setup discussed in my last commentary is a bust. Key support was violated and it violated the recent l...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.