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Why Youku Tudou Shares Briefly 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 online video content provider Youku Tudou (UNKNOWN: YOKU.DL  ) briefly popped as much as 11% following its third-quarter earnings report and a robust fourth-quarter forecast. Shares have since retraced to a gain of 4% as of this writing.

So what: For the recently ended quarter, Youku Tudou reported a loss of $0.11 per share on revenue of $79.9 million. Earnings came in $0.01 worse than Wall Street had been expecting, but revenue was higher than the $77.2 million consensus. What provided the biggest boost was the company's fourth-quarter sales forecast, which calls for $97.9 million to $101.1 million in revenue compared to the current consensus estimate of just $87.3 million.

Now what: The guidance looks promising, but Youku Tudou must now deal with integrating the recently purchased Tudou into the fold, and it still hasn't figured out how to turn that elusive profit. China's GDP growth has slowed to its lowest levels in years, which is hurting advertising spending all while Youku Tudou is trying to expand quicker than its competition. It could very well be a few years before the company's valuation matches its bottom-line results and, as such, I wouldn't be chasing the company here after today's pop.

Craving more input? Start by adding Youku Tudou to your free and personalized Watchlist so you can keep up on the latest news with the company.

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Comments from our Foolish Readers

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  • Report this Comment On December 06, 2012, at 2:49 PM, mrwsystems wrote:

    this article about YOKU and as to why it popped sounds great (as per NOV 30, 2012). Now, 12.06/2012, YOKU is going down the tubes. It is now under $15/share. I love YOKU and have traded it many times.

    Q: I am more than ready to invest into a few thousand sahes in YOKU but I would like you to hold my hand with advice. Is $15/share a bargain or should I wait a little more. I just purchased 5000 shares of YOKU @ 14.9, should I accumulate or wait ? thanks for any feedback

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