Why Xunlei Limited Stock Just Jumped 20%

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What happened

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Shares of Chinese cloud computing provider Xunlei Limited (NASDAQ: XNET) are up 20% as of Noon EST Thursday. In contrast to the stock's sudden jump nearly one month ago, this time there appears to be at least a nominal reason for the pop: earnings.

So what

Xunlei reported its financial results for fiscal Q3 2017 Thursday morning. Sales for the quarter grew 15.6% year over year to $47.3 million. Gross margins, however, declined steeply, falling 920 basis points to just 38.7%. At the same time, Xunlei's operating expenses exploded -- 61% higher to $48.7 million.

Thus, Xunlei actually spent more on operating costs than it collected in revenue for the quarter.

On the bottom line, the company ended up with a $25.6 million net loss, which translates to an $0.08-per-share loss, and a loss of $0.38 per American Depositary Share. (Each Xunlei ADS is comprised of five shares of common stock).

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Now what

No analysts have earnings projections out on Xunlei stock. Thus, Xunlei neither "beat" nor "missed" estimates. It did, however, exceed its own guidance for Q3 revenues. What's more, management predicted "the growth momentum to continue into the fourth quarter of 2017 with improvement in both the top and the bottom lines."

Of course, the real kicker that's driving Xunlei's stock price, one imagines, is the fact that management has set itself the goal of "transforming itself from a traditional internet service provider" into one that is "exploring emerging blockchain technology."

"Blockchain is reminiscent of the internet technology in the 80's [but] with millions of DAUs of Xunlei APPs and subscription members, we have the natural advantage of developing blockchain technology and exploring its applications to the mass markets," said Xunlei CEO Lei Chen.

Investors apparently like that idea a lot -- enough so to buy into a virtually unknown Chinese company with no earnings and mounting losses, all in search of a blockchain dream.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.