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Why ChinaCache International Holdings Ltd. Shares Popped 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: Even lacking new company-specific news, shares of ChinaCache International Holdings Ltd. (NASDAQ: CCIH  ) climbed 11% Tuesday on lower-than-average volume.

So what: ChinaCache shares recently plunged following both the company's mixed first-quarter results, and news that China Mobile is working to suspend procurement of third-party content delivery network and Web-caching services in an effort to stem "unhealthy content."

With regard to the latter, ChinaCache quickly stepped out last Monday to explain CDN and web-caching "are only part of the services ChinaCache provided to China Mobile, thus, the potential impact to our revenue is insignificant." Analysts at Rosenblatt Securities agreed with that assertion, saying the sell-off was an overreaction and insisting any CDN revenue lost by ChinaCache in this case should be easily offset by demand from other customers. 

Now what: In any case, today's gradual climb on low volume could be an indication a larger institutional investor wanted in. But it doesn't significantly change my previous stance on ChinaCache stock, which is to patiently observe its progress from the sidelines for now as it strives toward sustained profitability. ChinaCache missed earnings expectations in Q1, and with second quarter year-over-year revenue growth expected to decelerate sequentially to a range of "just" 31.9% to 33.9%, I'd like to see more evidence ChinaCache's top-line growth is sustainable before I dive in.

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Steve Symington

Technology and consumer goods specialist for the Fool. Steve looks for responsible businesses which positively shape our lives. Then, he invests accordingly. Enjoy his work? Connect with him on Twitter & Facebook so you don't miss a thing.

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Related Tickers

9/4/2015 3:59 PM
CCIH $7.25 Up +0.21 +2.98%
ChinaCache Interna… CAPS Rating: *
CHL $56.91 Down -1.87 -3.18%
China Mobile CAPS Rating: ****