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Why Youku Tudou Inc Shares Plunged, Then Recovered Today

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 Youku Tudou Inc (NYSE: YOKU  ) fell nearly 13% Friday morning, then gradually recovered, even after the Chinese Internet television specialist released mixed first-quarter results.

So what: Quarterly revenue rose 36% year over year, to $112.7 million, which translated to a 19% narrower adjusted net loss of $23.8 million, or $0.14 per share. Analysts, on average, were expecting a loss of roughly $0.23 per share on higher sales of $114.7 million.

For the current quarter, however, Youku Tudou expects revenue between $151.3 million and $160.9 million, the midpoint of which is well below analysts' expectations for Q2 sales of $164.1 million.

Now what: To be sure, Youku Tudou's addressable market is immense, and its top-line shortfall wasn't that significant. I can certainly understand, then, why shares recovered from today's early plunge. At the same time, competition is sure to intensify in the space, and analysts are likely to temper their growth expectations for Youku Tudou as they have time to fully digest today's news. For now, I'm perfectly happy watching Youku Tudou from the sidelines.

Your cable company is scared, but you can get rich
After all, Youku Tudou isn't the only way to play the changing dynamic in television. You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.

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