INTERNET: Youku, Dandang Spook Markets With Earnings Dates
Bottom line: Unusual scheduling announcements mean the latest quarterly earnings from Youku Tudou and Dangdang could disappoint, though a recent sell-off in their shares looks overblown.
Quarterly earnings announcements often ignite big moves in stocks, sparking big gains or losses if companies exceed or miss market expectations. It’s far less common to see company announcements of when they will release their latest quarterly reports create similar reactions. But that’s exactly what’s happened with the latest such earnings date announcements from struggling online video site Youku Tudou (NYSE: YOKU) and faded e-commerce player Dangdang (NYSE: DANG).
Shares of both companies have tanked to lows not seen in more than a year, following their release of unusual announcements about when they will report their next quarterly earnings. Company announcements of such dates are quite standard industry practice, allowing investors to prepare and attend conference calls to discuss the numbers. Such date announcements typically come 1-3 weeks before the actual results are announced, giving investors adequate time to prepare.
But in this case Youku Tudou and Dangdang have broken with the usual practice, in ways that I’ll describe shortly. The result has been a state of panic among investors, who fear the companies may announce downbeat results that fall far short of market expectations. The concerns sparked a 3.7 percent drop in Youku Tudou’s stock in the latest trading session, pushing it to a low not seen in more than 2 years. Dangdang’s shares have tumbled 16 percent in the last few trading days to lows not seen for 16 months, after it made a similarly worrisome announcement regarding its latest earnings date.
Let’s start Youku Tudou, which has just announced it will release its latest quarterly results on March 19, which is just 2 days from now. (company announcement) Such an announcement so close to the actual earnings release often raises red flags for investors, since it hints the company doesn’t want to give people too much time to prepare and perhaps even hopes that some people will miss the actual results due to the short notice period. Investors also often get similarly jittery when companies release their results during holidays, at strange hours or over the weekend.
Youku Tudou was once an investor darling due to its market-leading position in the high-growth online video space. But the company has repeatedly failed to realize its potential and is still operating deeply in the red, more than 4 years after it went public. A recent regulatory crackdown and its decision to remain independent have hampered its prospects, even as most of its rivals have been acquired by big Internet companies. Now investor believe the company may be preparing to announce that its losses are continuing to widen later this week, with no prospect of profits in sight.
Next let’s look at Dangdang, which has been spooking investors and delighting law firms that specialize in shareholder lawsuits since its unusual announcement last week regarding its earnings date. Dangdang had previously been set to announce its latest quarterly results last Thursday, but a day before that issued a press release saying it had postponed the event due to an unexplained “scheduling issue”. (company announcement)
That announcement sparked the sell-off that saw the shares drop steadily in the subsequent trading days, including a nearly 5 percent drop in the latest session. Dangdang has remained mum since its original rescheduling announcement. But law firms have been far more vocal, with at least 3 announcing they are likely to file class action lawsuits on behalf of shareholders who lost big money due to the sell-off.
As a longtime watcher of these companies and also the broader China tech sector, I agree that these announcements look slightly ominous. The fact that Dangdang hasn’t spoken up to ease concerns or announce a new date yet also doesn’t look good. But that said, I would also add that both sell-offs may be slightly overblown and perhaps the shares could see a slight rebound when each company finally releases its results.
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