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It's getting tiring. Watching Rediff.com (Nasdaq: REDF ) tumble after posting uninspiring quarterly results is getting old.
Every quarter you see speculators piling into shares of the small Indian website operator. Seemingly smart investors are wooed into believing that the world's second most populous nation will be a dot-com hotbed -- soon. They buy into Rediff, even though the profitless second-tier portal has been a perpetual disappointment with every passing quarter.
Well, today it's time for another quarterly cleansing.
Shares of Rediff opened 14% lower today after another brutal report. If you thought the previous quarter -- where revenue climbed just 1% and its deficit widened -- was bad, it's got nothing on this morning's stinker.
Revenue actually fell by 19% to a mere $4.8 million. Rediff's loss before a one-time gain widened to $1.95 million -- or $0.07 a share.
Show me the rupees
To be fair, Rediff's top-line results were weighed down partly by the depreciating rupee relative to the greenback. There's also the company's U.S. publishing business that is falling faster than Rediff's potentially promising online endeavors in India. However, revenue for its India online category -- accounting for 81% of the company's revenue and 100% of its speculative fervor -- still tumbled 7% in rupees relative to where it was last year.
"Just because Rediff is the only stand-alone Indian portal trading publicly stateside doesn't make the pure play a worthy investment," I argued a year ago. "It's too small a player. It's shrinking. It hasn't turned a profit in ages. If you're warming up to Rediff as a play on India's dot-com revolution, you're pointing in the right direction, but you're aiming too low."
Too many investors skimp on the due diligence, buying into Rediff believing it to be the Google (Nasdaq: GOOG ) of India. Do you know who really is the Google of India? Well, it's Google. Yes, Big G is the top portal in the country.
There are more sensible investments out there for investors looking for some serious skin in India's inevitable dot-com revolution. With India's Draft National Telecom Policy promising broader broadband access throughout the country, the more immediate winners will be connectivity and IT-related services provider Sify (Nasdaq: SIFY ) and leading travel website operator MakeMyTrip (Nasdaq: MMYT ) .
Sify is a larger company than Rediff, and revenue is unlikely to plunge when it reports its quarterly results next week. MakeMyTrip carries a stiff valuation, but at least the travel portal is profitable.
There may very well come a time when it's right to invest in Rediff. A rising tide lifts all ships, even a small dhow like we have here in Rediff. However, the moment to buy in isn't when your buddy tells you he has a hot stock tip on the Google of India. Wait for Rediff to prove itself worthy, or risk the undertow that seems to take out those skimping on research every three months.
Motley Fool's top stock for 2012 is also an international play, though it's far away from India. If you want to learn more the report is free -- like this article -- but it won't be around forever, so check it out now.