This week, Emerginggrowth.com, shines light on another Chinese stock, Sky-mobi Ltd (ADR) (NASDAQ: MOBI). With a market cap of $104.8 million, the stock has managed to make significant gains this year and hold on to them. In a market that is being affected by a lot of disruptive technologies, this makes it quite an interesting play.
Company Background
Sky-mobi Ltd provides a platform that powers mobile app stores in the People's Republic of China. The company operates the Maopao store that helps users search and purchase various mobile applications as well as music, eBooks and games. In addition, the company runs the Maopao community, a mobile social platform where subscribers can interact and play games in real-time. As by the end of March this year, the community is estimated to have a total of 1.2 billion subscribers. The company has its headquarters in Hangzhou, China.
Revenues falling but still profitable
On an annual basis, the company has been seeing revenues declining although earnings remain on the positive side.[1] In general the company has quite strong fundamentals. Quarterly earnings growth remains strong and gross margins remain healthy. The company has long term debts amounting to almost $22 million. This has been decreasing over the last three years but is still a cause of concern for an emerging growth company. It is quite difficult to predict future performance of this company as earnings fluctuate greatly each quarter. Hence investors need to tread carefully when investing in this stock.
Analysing Recent Stock Trends
Having hovered around $2 a share for the past two years, with a support level established at around $1.80 a share, beginning in April this year, the company shares begun to make significant gains, breaking the $3 resistance level, passing $5 before receding slightly. Average daily traded columns remain above 500, 000 although this is not translating into any significant changes in the company stock price. In general, 2013 has been a good year for the company as the company's shares on average are trading up 80% as compared to last year.
Analysts have given the company a "buy" recommendation. The mean price target is $5.10, with a high target of $7.50 and a low target of $2.50.[2] This information is based on perceptions of one broker covering this stock. Latest information on recommendations by top research firms is hard to come, but we know that the company's shares have been subject to a number of downgrades over the last 5 years. The main reasons cited are the company's inconsistent earnings. Hence although a number of people seem upbeat about this stock, it better to stay away from it for some time. Sensing the mood of apathy towards the company's stocks, management have been making efforts to boost investor confidence. Sky-mobi Ltd has been involved in a share repurchase program. "The company has so far repurchased more than $6 million dollars' worth of its shares. CEO, Michael Tao Song stated that the company is willing to extend this program as long as it's necessary. "[3]
[1] http://finance.yahoo.com/q/is?s=MOBI+Income+Statement&annual
[2] http://finance.yahoo.com/q/ao?s=MOBI+Analyst+Opinion
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.