I first started slamming China Finance Online (NASDAQ: JRJC) on October 3, when I asked How can China Finance online possibly not be overvalued?
To me -- and Citron Research -- there was no possible way that the stock wasn't heinously overvalued. But for some odd reason, the Wall Street analysts just couldn't get enough of it. Brean Murray slapped a $35 target on the stock, while the more conservative JPMorgan valued it at $29, which is the same target as Standard & Poor's. What are/were they thinking?
Now the stock has pulled back to $13.28 from its high of over $47 a share -- which was reached, incidentally, the day that I first mentioned the company. Now investors who bought into the hype are left wondering what happened. Is China Finance Online a buy now? I seriously doubt it. The market cap is still around $300 million on pretty tiny revenue: $25 million in 2007. More than 10 times sales for a company that sells stock newsletters in China using a sales force of telemarketers. Is that a joke?
With China's stock market down more than 17% this year, you have to think that the enthusiasm for stock pick newsletters will be waning after the stock market mania that enveloped the country last year. Playing the stock market has a way of becoming less fun when you're losing money hand over first.
Even after the precipitous drop, I'd still give China Finance Online wide berth.
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Reader Comments (Page 1 of 1)
3-23-2008 @ 6:30PM
john said...
are You a joke?
JRJC is expecting and expected to earn +$24M in 2008 - NET INCOME, most of it is already paid by customers.
so by P/E=15 you get a $360M company. but since it grows more than 100% a year, its value should be triple - $1B, or around $30..
3-23-2008 @ 10:31PM
simple mind said...
hello
yes JRJC and like a 2000 other stocks along with the solar and banks
have been trashed,,,,all with bogus research and strong bullshit buys
but why just single out jrjc????
you should do more research and present a better valid blog
last spring bernarke and the rest of the freaks were saying there was no sub prime problem and housing stocks were a good Buy
ciao
3-24-2008 @ 12:18AM
randomwalker said...
"... you have to think that the enthusiasm for stock pick newsletters will be waning after the stock market mania that enveloped the country last year"? "You have to think"?! Is that the way you advise how people should invest? How about some hard data: JRJC has 74 mil in net cash and 20 mil in guaranteed revenue already paid by customers! The company projects to earn $24 to $29 mil (Non-GAAP) in 2008. That makes a forward P/E of 10.5 to 12.7 on 23 mil shares, which is very low in such a rapidly growing market (theStreet.com has a forward P/E of 13.3). By the way, the "market mania" is still on in China and there is nothing wrong with using telemarketers to promote its products. In fact, more than anything else, marketing is the reason why JRJC has been so successful!