When is bad news good news? In Wall Street speak, that's not a trick question at all. A company can have a difficult quarter and still find its shares inching higher, as long as it didn't stumble as badly as the pros were expecting.
We saw that this morning with TOMOnline
Despite mustering a healthy 36% increase in online advertising, TOM Online's flagship wireless Internet business suffered a 20% hit. That's more than enough to sink this battleship when the segment accounts for 89% of its revenue mix.
It's just not a good time to be toiling away in wireless offerings. A few years ago, you had NetEase
TOM Online is now bearing the wrath of both government policy pressures as well as a fierce competitive environment for the scraps that are still fair game. TOM is all over the map there. Whether it's multimedia messaging services or peddling ringback tones or promoting the Dream China talent show contest, TOM is all over the growing leisure space in China. Yes, that's a great place to be with the resilient Chinese economy, but the company isn't alone.
It is looking for further weakness in the current quarter. That doesn't mean that the stock's not worthy of its status as a Stock Advisor newsletter recommendation. As we have seen with regulatory lulls and cutthroat competition, the pressure eventually passes and the survivors get back into feasting mode.
TOM has the right ingredients to make it. It has struck the right deals, like one brokered two years ago with eBay's
Longtime Fool contributor Rick Munarriz is a fan of China's growth story but does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.