Citron Research, formerly known as StockLemon.com, brings to our attention China Finance Online Co. (ADR) (NASDAQ: JRJC), which sells a series of stock tip newsletters in China. After taking a look at the company, I have to agree with Citron's conclusions: This stock is heinously overvalued.
First a quick look at the numbers. This publisher of newsletters trades at more than 65 times sales with a price/earnings ratio of 873. Given that the company's business model is selling stock tip newsletters with an army of telemarketers, I can't even imagine what the company's barrier to entry is that makes it worth such an astronomical valuation -- a market cap of $925 million dollars.
As Stock Lemon points out, this is all on projected revenue of about $20 million for 2007: "Comparatively speaking TheStreet.com (NASDAQ: TSCM) generated $57 million in revenue and has a market cap of about 1/3rd this name."
Why is JRJC trading so high? It probably has something to do with investors' desire to find something that is tied to the Chinese stock market's rapid growth. But at this valuation, whatever it is, it sure as heck has nothing to do with rational thought.
JRJC looks like a pretty good short here.
How can China Finance Online (JRJC) possibly not be overvalued?
Posted Oct 3rd 2007 4:40PM by Zac Bissonnette
Filed under: Internet, Stocks to Sell
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Reader Comments (Page 1 of 1)
10-03-2007 @ 9:06PM
al said...
This stock is going higher. They have an announcement on the way.
10-03-2007 @ 10:45PM
kas said...
I believe you simplified their biz model. They also purchased a brokerage firm in Sept...KAS
10-04-2007 @ 1:11AM
BabyFaceMagee said...
I'd like to see some evidence they already bought a brokerage. From what I've seen, it's only a rumor...like many that are out there. This stock has very limited earnings and while it might be worth more in the future, it is woefully overpriced at this level. If you want to prove otherwise, let's see some financials, let's see some numbers. A PE of close to 900 is outrageous by any standards. This smells to high heaven like a pump and dump. I bought at 32 and sold at 42. I'm shorting at this level.
10-04-2007 @ 10:15AM
Mike said...
You know nothing about COM companies.
10-04-2007 @ 10:16AM
Mike said...
You know nothing about COM companies in China.
10-04-2007 @ 10:20AM
Mike said...
If you buy BIDU at $300, JRJC deserves $150!!!
10-04-2007 @ 2:11PM
Alex Li said...
Compare it to TSCM, it is overvalued. Compare to E-trade, it is not overvalued. Compare it to TSCM + E trade, it may be cheap.
10-08-2007 @ 10:17AM
tony said...
I definitly sure JRJC is overvalued depends on its model and china market environment, there are many website like JRJC, and the competition is tough, JRJC is just lucky IPO on USA, and most people don't know much about the internal issue of China, they thought JRJC is the No.1, and I'm sure there are some MM is operating this stock by their purpose: profit.
10-10-2007 @ 7:38AM
chartsetups said...
JRJC is actually not as overvalued as you may think, especially if subscriber growth to their stock service increases at more than 20% growth....
Heres why: http://www.chartsetups.com/articles/49/1/JRJC-Subscriber-Dependant-Valuation/Page1.html
10-11-2007 @ 12:48AM
idiot said...
Going to $1000
--idiot
10-12-2007 @ 9:03AM
Adi said...
Hi Zac,
I agree with you that the stock's overvalued. Infact the three words - "China" "Finance" "Online" when combined can result in nothing but over valuation. However I do think you over simplified.
They charge $700 to first time subscribers (most of who are retail investors!! Imagine retail guys paying that much. Also this is down from $1000 that they used to charge) and they provide a lot of online software so its not just newsletters. By their own admission the market for their products is $1Billion. If you compare that to their mcap today things simply dont tie up.
But the thing is that you can get killed shorting a stock which moves daily by +/- 10%. It has more than doubled in the last 2-3 weeks.
10-15-2007 @ 4:19PM
Twins2feed said...
To say that, " If you buy BIDU at $300, JRJC deserves $150!!!" is like saying, "if GOOG is at $600 then AMTD should be at $300.
Doesn't work like that.