Why ChinaCache International Holdings Ltd. Shares Plunged Today

Is ChinaCache's drop meaningful or just another movement?

May 16, 2014 at 2:57PM

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)  fell 17% Friday after the company released mixed first-quarter results.

So what: Quarterly revenue increased 40.4% year over year to $52.1 million, exceeding the top end of ChinaCache's previous guidance by 5.2%. This also helped ChinaCache swing from a loss this time last year to adjusted net income of $0.4 million, or $0.02 per American depositary share. However, analysts on average expected significantly higher adjusted earnings of $0.05 per share on lower sales of $45.8 million.

For the second quarter, ChinaCache sees revenue in the range of $54.7 million to $55.5 million, or an increase of 31.9% to 33.9%.

Now what: In any case, it's hard to blame the market for taking a step back given ChinaCache's bottom-line shortfall. And given a number of impressive partnerships announced during the quarter, investors want to see ChinaCache's top line at least maintaining is previous torrid pace of growth. For now, as ChinaCache continues to strive toward achieving sustained profitability, I'm perfectly happy watching from the sidelines.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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