Why Youku Tudou Shares Popped

Why Youku Tudou Shares Popped

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 Chinese online video technologist Youku Tudou surged 12% today after its quarterly results and outlook topped Wall Street expectations.

So what: The stock has been sluggish in recent weeks on concerns over slowing growth, but a strong third quarter -- loss narrowed to just $0.01 per share on a revenue increase of 14% -- coupled with upside guidance is quickly easing those worries. In fact, Youku's mobile traffic soared to more than 300 million video views per day, while the company managed to largely control costs, giving analysts plenty of good vibes over its scale advantages going forward.

Now what: Management now expects to reach non-GAAP profitability in the fourth quarter on revenue growth of 35%-42%. "We will continue to drive mobile monetization and ramp up revenue from local advertising clients, content marketing solutions and paid services," said Chairman and CEO Victor Koo in a press release. "We expect that Youku Tudou will be non-GAAP profitable in the fourth quarter of 2013 after Youku on a stand-alone basis reached the same financial milestone in third quarter of 2012, demonstrating the success of the Youku Tudou merger and solid execution by the team." Of course, with the stock up a whopping 115% from its 52-week lows and trading at a 40-ish forward P/E, much of that success might already be baked into the valuation.

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The article Why Youku Tudou Shares Popped originally appeared on Fool.com.

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