Why Xunlei Limited Stock Jumped 17.5% This Morning

Markets Motley Fool

What happened

Continue Reading Below

Shares of would-be Chinese blockchain titan Xunlei Limited (NASDAQ: XNET) are hopping this morning, up 17.5% in early trading, and retaining a 13.8% gain as of 12:35 p.m. EST. For that, you can thank Barron's -- and Morgan Stanley.

Yesterday, Barron's reported that "in the last two weeks of December," investment banker Morgan Stanley disclosed that it has taken in excess of a 5% stake in Xunlei (and four other small stocks, Roku among them).

So what

More than a mere upgrade, the news appears to show that Morgan Stanley is putting skin in the game -- and money where its mouth is. But should you follow suit?

After all, up until late last year, when bitcoin and blockchain became all the rage on Wall Street, Xunlei Limited was best known as a "traditional internet service provider" in China. It was only after the company inserted a throwaway line about its goal of "exploring emerging blockchain technology" that investors decided Xunlei should benefit from the blockchain effect, and began buying Xunlei shares in bulk.

Continue Reading Below

Now what

Xunlei stock has a market capitalization of $1.1 billion -- quadruple what it was one year ago -- but no profits to support it. Rather, Xunlei has reported losses of nearly $49 million over the past 12 months. As a result, Xunlei stock is even less profitable than bitcoin itself -- which earns no profits, but also suffers no losses.

In this respect at least, I'd argue Xunlei is an even riskier investment than bitcoin itself.

10 stocks we like better than Xunlei
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Xunlei wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 2, 2018

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.