Why Tudou's Shares Jumped

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 company Tudou Holdings (Nasdaq: TUDO  ) were notching big gains today, rising as much as 12% in intraday trading after the company reported first-quarter results.

So what: For the quarter that ended in March, the company delivered scorching 77% revenue growth. The $22.3 million tally topped both management's guidance as well as the average estimate from Wall Street. On the bottom line, the company is still in the red, but its $0.75-per-share loss was narrower than the $0.88 that analysts thought the company would report.

Of course, though investors tend to put a lot of weight on whether or not a company tops Wall Street estimates, it's worth noting that there are only two analysts currently following Tudou.

Now what: In March, Tudou and competitor Youku (NYSE: YOKU  ) announced that they're planning to merge in a transaction that will leave Tudou shareholders with 29% control of the combined company.

The appeal of investing in Tudou (or the combined Youku Tudou) is pretty obvious: The company is based in huge, rapidly growing China and it's dealing in online video. The drawbacks, meanwhile, are likewise obvious: It's based in opaque China and it's unprofitable.

The company's top-line growth looked great in the first quarter and its loss improved versus last year. However, the overall package here -- an unprofitable, China-based, advertising-dependent online-video platform -- holds little appeal for this Fool.

Want to keep up to date on Tudou Holdings? Add it to your watchlist.

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Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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