Why ChinaCache International Holdings Ltd. Shares Soared

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.  (NASDAQ: CCIH  )  rose more than 10% during Thursday's intraday trading, then settled to close up around 4% after the company announced it has won a contract to provide additional content delivery network services to China Eastern Airlines.

So what: After becoming China Eastern Airlines' first CDN partner early last year, ChinaCache was already providing services within China. This new contract, however, expands the scope of the agreement to a global scale, which will enable ChinaCache to help "improve the speed, reliability and security of China Eastern Airlines' website for users worldwide."  

Now what: To be sure, this is great news for ChinaCache investors, who endured a 17% plunge after the company reported disappointing quarterly earnings in November. Even so, those numbers were largely due to the effects of a one-time bad debt provision stemming from a contract renewal disagreement with China Mobile, so shouldn't be an issue going forward.

However, it's worth noting that the company still isn't consistently profitable, and shares have rallied more than 60% during the past month alone. As a result, and while ChinaCache could certainly have plenty of upside left, I personally prefer to see how ChinaCache's next quarterly report turns out before making any decisions regarding purchasing the stock at today's levels.

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  • Report this Comment On January 16, 2014, at 9:11 PM, enihcam wrote:

    1. I don't know whether Akamai have overseas business, but ChinaCache is the only CDN provider in China that can help US companies to cache their data/apps to China local (e.g. iOS App Store), and more and more worldwide companies are becoming their customers.

    2. If ChinaCache were 'consistently profitable', the stock price would be >40$ already, and it would never be in my investment list now.

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