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.
After receiving a $42K fine from China's National Copyright Administration for providing access to pirated material, Baidu (BIDU +1.5%) has agreed to filter pirated movies and TV shows from its services.
Chinese online video leader Youku (YOKU +4.3%), which has invested heavily on building a library of legally-distributed content (content costs totaled 56% of the company's Q3 revenue), is up sharply.
Baidu's widely-used video player has turned into a top source for pirated material. Youku, along with several peers and copyright agencies, sued Baidu in November for allegedly enabling piracy through a variety of products/services.
At the same time, Baidu's PPS and iQiyi sites have joined rivals in licensing and distributing professional content.
Though still generally below their mid-October highs, Internet momentum stocks are turning in what might be their best performance during a rally that has now lasted two weeks. While Twitter (previous) is the star of the show, Facebook (FB +3.5%), Yelp (YELP +1.8%), Groupon (GRPN +4.7%), Netflix (NFLX +2.1%), LinkedIn (LNKD +1.4%), and Pandora (P +3.4%) aren't getting left out.
Several Chinese Internet names are also higher. In addition to Baidu, which is benefiting from a bullish Pac Crest note, Sina (SINA +6%), Ctrip (CTRP +6.1%), Qunar (QUNR +6.3%), and Youku (YOKU +3.9%) are staring at big gains.
Morgan Stanley's Scott Devitt is out with another bullish note on Groupon. Devitt notes an MS survey of 358 SMBs found only 26% of merchants have run Groupon deals in the last 12 months, something he thinks suggests there's "a long run way of merchants" that can still be signed up.
He also sees room for Groupon to improve its customer targeting - the company still isn't able to track which deals were shown to customers, or were clicked on, in prior e-mails - and expects its new site (allows deals to be browsed without an e-mail address being given) and a revamped e-mail layout to boost growth.
Youlu (YOKU) expects Q4 revenue of RMB860M-RMB900M ($141.2M-$147.8M), below a consensus of RMB921.5M ($151.3M). But the company is also forecasting it will achieve non-GAAP profitability in Q4 after posting a $26.1M ($0.16/share) non-GAAP net loss in Q3.
The Chinese online/mobile video leader took a page from Netflix in Q3 and decided to accelerate the pace at which it amortized content costs for TV serial dramas and moves, so as to reflect a "new consumption pattern" among viewers. This led's Youku's content costs to rise 58% Q/Q to $78.2M and equal 56% of revenue, up from 40% in Q2.
If not for the change, content costs would've only totaled $54.6M, +11% Q/Q and 39% of revenue, and non-GAAP net loss would've only amounted to $2.5M.
While total revenue rose 14% Q/Q, ad revenue only rose 3%. Bandwidth costs rose 11% Q/Q to $29.7M, and sales/marketing costs rose 5% to $25.7M.
The day has also seen a dismal IPO from online textbook rental leader Chegg, a WSJ report of a rejected $3B+ Facebook offer for Snapchat, and a vague afternoon rumor about M&A interest in Trulia from Realogy.
U.S. standouts: ZNGA +7.4%. LNKD +4.8%. P +3.3%. ANGI +2.6%. GSVC +4.1% (owns a Chegg stake).
Baidu (BIDU +1.4%) is up moderately following news Chinese online video rivals Sohu (SOHU +1.7%) and Youku (YOKU +3%) have joined the MPAA and various entertainment/media companies in suing it for piracy. The assorted parties accuse Baidu of enabling piracy through its video search engine, as well as through video player apps and a TV dongle.
Twitter (TWTR) has been started at Neutral by Sterne Agee. Shares -1.4% premarket after dropping 7% on Friday in the wake of neutral/bearish coverage launches. Shares still +58% from their $26 IPO price.
Veeva Systems (VEEV) has received four bullish ratings and two neutral ones on underwriter coverage day. Shares +0.6%.
American Tower (AMT) has been upgraded to Buy by Citi.
Youku (YOKU) has been upgraded to Buy by Brean ahead of Thursday's Q3 report. Shares +3.1%.
BT has been upgraded to Overweight by JPMorgan after outbidding Sky for the U.K. TV rights to Champions League games.
Netgear (NTGR) has been upgraded to Sector Perform by RBC.
Even as Twitter blasts off to a $25B valuation following its much-hyped IPO, U.S. and foreign Internet stocks are giving back some more of the massive 2013 gains that have led many names to trade at steep multiples.
One sign investors in this space are in a profit-taking mood: Zillow (Z -4.3%) and YY both sold off yesterday in spite of delivering Q3 beats (I, II) and above-consensus guidance; Zillow is adding to its losses today. Likewise, SouFun (SFUN -5.4%) has turned negative after providing a Q3 beat and strong guidance.
Notable U.S. decliners: FB -2.4%. LNKD -2.8%. GRPN -4.7% (reports after the close). ZNGA -2.7%. P -3.8%. TRLA -5.4%.
NQ Mobile (NQ) is up 2.5% AH after posting a 25.1% gain in regular trading as investors welcomed its fund transfer announcement.
Bulls and bears continue to argue fiercely over NQ's prospects. On SA, bearish Goldbaum Research observes NQ's games (offered via its FL Mobile game publishing subsidiary) appear to have been pulled from Apple's App Store, while bullish Toro Investment Partners argues Muddy Waters' track record is quite mixed, and that many firms have had a chance to look at NQ's books.
Chinese Internet and solar stocks, many of which have skyrocketed this year, have closed with decent losses after the Shanghai exchange fell for the fourth day in a row amid credit crunch worries, and as NQ Mobile continued to feel the impact of Muddy Waters' fraud allegations.
Muddy Waters' detailed accusations regarding ghost addresses, a shell company, inflated market share figures, dubious cash balances, and spyware are likely to yield fresh scrutiny of the financial statements provided by Chinese ADRs, and could also affect the reception given to upcoming IPOs (I, II). Investor concerns about the bookkeeping of U.S.-traded Chinese firms had diminished some this year.
"We believe that Google's (GOOG +12.8%) ability to monetize experiences through engagement-based services will allow it to disrupt many hardware and software layers over time," writes Evercore's Ken Sena, exemplifying the glowing analyst commentary that has followed Google's Q3 beat.
Sena, who is raising his PT to $1,100, sees Google's services investments pressuring near-term margins, but also creating "a stronger platform ecosystem in which more collected data, better predictive analytics, and an increased amount of screen connectivity will lead to better overall search economics in addition to new opportunities."
Needham and Jefferies have raised their PTs to $1,150, and Deutsche has raised its target to $1,220. YouTube's mobile growth, strong paid click volumes, and the potential for Enhanced Campaigns to lift search ad sales (after doing less damage than expected in Q3) are all mentioned as reasons to stay bullish.
U.S. Internet peers continue to rally in sympathy: FB +4.1%. LNKD +3.7%. YELP +7.8%. AMZN +3.3%. Z +3.9%. TRLA +4.8%. ZNGA +2.8%.
With the government shutdown having reached day 8, many U.S. and Chinese Internet stocks that have seen giant 2013 gains (often with the help of momentum traders and/or short squeezes) are falling sharply.
U.S. decliners include Facebook (FB -5.2%), Yahoo (YHOO -5.2%), Netflix (NFLX -4.7%), LinkedIn (LNKD -7%), Zillow (Z -5.3%), Trulia (TRLA -7.5%), Yelp (YELP -9.3%), Groupon (GRPN -4.9%), and Web.com (WWWW -10.2%).
Chinese decliners include Baidu (BIDU -6.2%), Sina (SINA -7.5%), YY (YY -7.3%), Sohu (SOHU -5.1%), Renren (RENN -9.2%), Youku (YOKU -9.6%), Vipshop (VIPS -6.9%), and Dangdang (DANG -10.7%).
A chart of the YTD performance of some key names speaks for itself.
Youku (YOKU) has reached a multi-year content deal with FremantleMedia, the Bertelsmann unit responsible for producing American Idol, X Factor, Project Runway, and many other popular shows. 202 hours of programming will be made available in year 1.
Youku's content spend has been growing rapidly, as the company tries to stay ahead of Baidu, Sohu, and other rivals in a competitive Chinese online/mobile video market. Youku's content costs rose 46% Y/Y in Q2 (outpacing rev. growth of 30%), and equaled 40% of revenue.
Youku Tudou Inc is an Internet television company in china. Its internet television platform enables consumers to search, view and share high-quality video content quickly and easily across multiple devices.