Why ChinaCache International Holdings, Ltd. Shares Plummeted

Why ChinaCache International Holdings, Ltd. Shares Plummeted

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 ChinaCache International Holdings, Ltd. plunged more than 17% Tuesday after the Chinese Internet content and application delivery services company reported disappointing quarterly earnings.

So what: Quarterly revenue rose 31.6% year-over-year to $45 million, which translated to an adjusted net loss of $2.6 million, or $0.11 per share, compared to an adjusted net income of $1.33 million during the same period last year. Meanwhile, analysts were looking for an adjusted net loss of just $0.02 per share on sales of $44.8 million.

Now what: Management blamed the increased loss both on the accrual of a roughly $2.19 million bad debt provision stemming from a contract renewal "disagreement" with China Mobile, as well as a little over half a million dollars in stock-based compensation from its newly issued restricted share and stock operation grants in Q3.

Specifically, ChinaCache CFO Jing An says, the disagreement resulted in a contract renegotiation during the renewal, which the much smaller company understandably "felt [...] was in our mutual best interest to agree to the settlement in order to proceed with our relationship."

Even so, ChinaCache insists the charge is a nonrecurring item which shouldn't impact its results going forward, so today's pullback could very well represent a buying opportunity for patient long-term investors looking to capitalize on China's Internet growth.

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The article Why ChinaCache International Holdings, Ltd. Shares Plummeted originally appeared on Fool.com.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of China Mobile. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

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