Why Cheetah Mobile Inc. Shares Sprinted Lower Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Cheetah Mobile fell 16% Tuesday after the Chinese Internet security software specialist released unaudited first-quarter results.

So what: Quarterly revenue jumped 131.6% year-over-year to $50.8 million, which translated to a 4.8% decrease in adjusted net income to $5.3 million, or $0.04 per diluted American depositary share. In addition, Cheetah Mobile sees second quarter revenue between RMB335 million and RMB345 million. Based on today's exchange rates, that's between $53.9 million and $55.5 million, or an increase of 111% to 117% from the same year-ago period.


Now what: There are currently no analyst estimates to compare, but Cheetah Mobile only just held its IPO three weeks ago and is prone to plenty of volatility right now. But given the decelerating growth indicated by Cheetah Mobile's second-quarter revenue guidance, investors should keep their eyes on whether Cheetah Mobile's outsized top line increases are sustainable over the long term.

In addition, with regard to Cheetah's falling profitability, first-quarter operating expenses jumped 148.8% over the same period last year. Cheetah Mobile states this was "primarily due to an increase in research and development expenses, selling and marketing expenses, and general and administrative expenses" -- or, in other words, essentially every one of its expense categories.

In the end, with its shares currently trading at a rich 20 and 169 times trailing 12-month sales and earnings, respectively, I'm perfectly happy watching this one from the sidelines.

Top dividend stocks for the next decade
After all, why deal with this kind of volatility when the smartest investors know dividend stocks simply crush their non-dividend paying counterparts over the long term? That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

The article Why Cheetah Mobile Inc. Shares Sprinted Lower Today originally appeared on Fool.com.

Steve Symington and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Investment Strategies

What's your investing game plan?

View Course »

Basics of Diversification

Learn one of the fundamental concepts of building a portfolio.

View Course »

Add a Comment

*0 / 3000 Character Maximum