I looked at some of the most heavily traded tech stocks to identify buy ideas. My list includes an internet television provider from China, a social networking Internet platform, a broadcasting satellite radio system, and a professional social media network company. These stocks were chosen because they are emerging leaders, in the tech space and have witnessed twice their average daily volumes this month when compared to last month. Here is my analysis:
Youku.com, Inc. (YOKU)
YOKU has an unattractive debt to equity ratio of 2.13, which is higher than its competitors, Baidu, Inc. (BIDU) and Sohu.com, Inc. (SOHU) which have a debt to equity ratio of 1.02 and zero, respectively. In addition, YOKU has a poor return on equity of -28.71% compared to BIDU at 53.58% and SOHU at 21.14%, respectively. Currently, YOKU and its competitors are not offering any dividends to its shareholders.
However, BIDU and SOHU are showing increases in their earnings, whereas, YOKU remains stable and trading lower than its peak of around $64 per share back in April. Moreover, YOKU has a lower gross margin of 32.15% compared to BIDU at 80.51% and SOHU at 73.59%, respectively. Furthermore, YOKU is trailing behind in market share compared to its competitors. However, Youku has expanded its online video beyond the web with a new desktop client and smart remote, which enable users to watch high quality professional content across multiple Internet enabled devices from desktops to Android mobile phones.
This is great news for the company to help increase its price to sales ratio. However, due to the fluctuation in the stock, the company does not seem to show strength in its price earning appreciation because the company’s 5 year price earning to growth (PEG) is -3.31 compared to its competitors, BIDU at 0.90 and SOHU at 0.71, respectively.
Renren, Inc. (RENN) –RENN is expected to increase its share price, with a one year target estimate of around $8.53 per share. Currently, RENN and its competitors, Baidu, Inc. and Sina Corp. (SINA) do not offer any dividends to its shareholders. Moreover, RENN has no debt, compared to its competitors BIDU and SINA with debt to equity ratios of 2.13 and 1.02, respectively.
In addition, RENN has an attractive gross margin of 79.37%, whereas, BIDU and SINA have a gross margin of 80.51% and 57.10%, respectively. Furthermore, RENN has just announced an acquisition of online video site, 56.com, which will help increase sales and users to its site. Moreover, RENN has an attractive price to sales ratio of 17.65, which makes it a good buy for a price earning appreciation investment.
Sirius XM Radio Inc. (SIRI) - SIRI has an attractive gross margin of 61.79% over its competitors, Cumulus Media Inc. (CMLS) and Westwood One Inc. (WWON) with 40.90% and 3.10%, respectively. Moreover, SIRI and Subaru of America announced in early October that Subaru will offer satellite radio on all models beginning with the 2012 model year vehicles. Moreover, all 2012 model year Legacy and Outback Limited models will come standard with factory installed satellite radio. The joint venture will help to increase the revenue for SIRI and increase its price to sales ratio, which is currently at 2.01 compared to its competitors, CMLS at 1.29 and WWON at 0.58, respectively. Moreover, revenue for SIRI is expected to increase at 6.40% and price earning to growth within the next 5 years is expected to increase at 0.84.
Currently, the company does not offer any dividends to its shareholders. Moreover, the price earning to growth ratio may not increase quicker than anticipated largely due to new vehicle models providing adapters for the iPod and MP3 players, which allow consumers to sync downloaded music to their vehicle’s radio system. Therefore, due to the other popular brand vehicles offering an alternative to satellite radio such as synchronizing downloaded music from an iPod and an MP3 player, the sales may not be significant to increase SIRI’s market share. Thus, SIRI would not be considered a good investment for price earning appreciation.
LinkedIn Corporation (LNKD) – LNKD shows an attractive price earnings to growth ratio with five years of 43.34. Moreover, LNKD’s revenue growth is expected to increase 120.50% with a price earnings ratio of 427.26. The company is currently not paying any dividends to its shareholders. Furthermore, LNKD has a zero debt to equity ratio and a good return on equity ratio of 8.47%.
In addition, LNKD has an attractive gross margin of 82.74%. Moreover, LNKD has no competitors on the open market, but the LNKD has one growing competitor, Viadeo, which is based out of Europe. LKND currently has over 90 million users compared to Viadeo with over 35 million users. Moreover, Viadeo is expanding its business into the United States where it plans to open an office in San Francisco, California.