October 21, 2010
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 networking equipment maker UTStarcom (Nasdaq: UTSI ) fell by as much as 14% earlier today after the company lowered its full-year revenue target from $325 million to a range of $278 million to $280 million.
So What: UTStarcom is going backwards just as many Chinese stocks are experiencing massive revenue growth. In networking equipment, Cisco (Nasdaq: CSCO ) has improved sales by 10.9% over the past year. Juniper Networks (Nasdaq: JNPR ) has grown sales by 16.6% over the same period. UTStarcom is now on pace for its revenue to decline by at least 27%.
Now What: Let this be a lesson. While many China-based stocks are ready to pop, not every Chinese stock is worth your investment dollars. In UTStarcom's case, a history of negative returns on capital and declining revenue should tell you all you need to know.
Interested in more info on UTStarcom? Add it to your watchlist by clicking here.