On a day when the Nasdaq is down 1.8% and the S&P 2.2%, many Chinese Internet stocks are rallying. China's lowest CPI print in five years - it helped the Shanghai exchange rise 0.7% overnight - could be playing a role.
Under a "strategic partnership agreement," China Telecom's (CHA +0.9%) cloud services unit will resell Akamai's (AKAM +0.1%) CDN, performance acceleration, and cloud security services. In addition, the companies plan to cooperate "in the areas of technology and network access."
Akamai already offers CDN services in China. Its local rivals include ChinaCache (CCIH -3.4%), which is selling off today, and Alibaba.
Separately, Akamai has updated its Ion service - it optimizes content delivery based on device, location, and other situational factors - to include faster domain name resolution, more self-service tools, and more advanced reporting features.
Ion is one of a slew of value-added services Akamai is relying on to lower its dependence on low-margin media delivery services.
ChinaCache's (CCIH -11.4%) Q1 revenue of $52.1M beat guidance of $50.1M-$50.9M. Q2 guidance is for revenue of $54.7M-$55.5M.
At the same time, gross margin (closely watched) fell to 30.5% from 31.7% in Q4 and 31.1% a year ago. On the CC (transcript), ChinaCache noted higher equipment depreciation/migration expenses offset lower bandwidth/colocation spend (as a % of revenue).
The company mentioned cost controls are expected to keep a lid on opex over the near-term, but added capex will "continually increase" over the next two quarters due to investments in a new resource management system. It's expected to return to a level of ~10% of revenue afterwards.
A partnership with China Telecom isn't expected to boost Q2 sales, but might have an impact in Q3. Surging Chinese mobile data traffic (boosted by 4G network rollouts) is expected to provide a 2H lift.
Hit hard on multiple trading days last week, high-beta Chinese Internet and solar stocks are flying higher amid a tech rally.
Leading Chinese Internet gainers: GOMO +14.8% (tumbled last week post-earnings). BITA +10.2%. WUBA +8.9%. VIPS +6.4%. SFUN +6.4%. WBAI +6.3%. CCIH +5.9%. ATHM +5.8%.
Notable Chinese solar gainers: CSUN +9.7%. JKS +8.9%. TSL +5.4%. YGE +4.1%. JA Solar is rallying with the help of a bullish Northland coverage launch.
Recent IPOs King Digital (KING +4.5%) and Castlight Health (CSLT +16.1%) are among the winners. King remains 16% below its $22.50 IPO price. Castlight is 54% above its $16 IPO price, but well below a post-IPO high of $41.95.
After opening lower, volatile ChinaCache (CCIH +21.9%) has gradually soared following news the company is launching a 3.37M-share private placement at a price of $16.34 (gross proceeds of $55M). The placement price is 37% below current levels.
The placement comes ahead of ChinaCache's March 12 Q4 report. The company had $49.4M in cash/equivalents at the end of Q3, and a $9.8M short-term loan outstanding.
On a good day for many tech momentum plays, solar and Chinese Internet stocks led the way.
Solar names could be benefiting from Chinese government remarks suggesting Beijing remains open to trade talks to end its ongoing solar import dispute with the U.S. The comments come after the ITC added Chinese solar panels made with Taiwanese cells to its list of Chinese panels covered by import duties.
Also: SunEdison (SUNE +6.6%) has filed for an IPO for its solar project business, a move that could entice other companies with major solar project ops to do the same.
Chinese Internet stocks, crushed over the last few trading days amid SEC-related concerns and a general rout in tech momentum plays, are rebounding sharply today in tandem with other high-beta tech stocks.
Possibly helping: The SEC has settled a dispute with Deloitte over its request for documents related to Longtop Financial, a Deloitte-audited Chinese firm suspected of accounting fraud. The settlement, which comes after the SEC received a "substantial volume" of requested docs, is fueling hopes the SEC's auditing ban on the Chinese arms of the big-4 accounting firms (including Deloitte) will be revoked, and a final resolution between U.S. and Chinese regulators achieved.
Also: Morgan Stanley is calling the selloff a buying opportunity, and has picked five names it's a fan of - Baidu (BIDU +2.8%), YY (YY +14.5%), New Oriental (EDU +2.8%), Dangdang (DANG +6.8%), and Ctrip (CTRP +5.2%)..
MS expects Baidu's margins (recently pressured by huge investments) to stabilize later this year with the help of accelerating sales growth; it's pleased with Ctrip's willingness to sacrifice near-term margins for share gains; it think Dangdang's e-commerce strategy is yielding margin improvement and better fulfillment efficiency; and it's a fan of YY's "sticky" user base and monetization potential (less than 2% of users are currently monetized).
Major gainers include Sungy Mobile (GOMO +11.3%), 500.com (WBAI +18.3%), ChinaCache (CCIH +9.8%), Vipshop (VIPS +10%), Bitauto (BITA +9.5%), and Qunar Baidu-controlled (QUNR +8.8%).
Looks like traders finally realized that CCIH is a legit China internet play like QIHU or YOKU
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ChinaCache International Holdings Ltd is a provider of Internet content and application delivery services in China. It provides a portfolio of services and solutions to businesses, government agencies and other enterprises.