Why Shares of Xunlei Ltd. Slumped Today

By Timothy GreenFool.com

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: Shares of Chinese digital media company Xunlei Ltd slumped on Thursday after the company reported first-quarter revenue that missed analyst expectations by a wide margin. At 1:30 p.m., the stock was down about 18.5%.

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So what: Xunlei reported first-quarter revenue of $30.2 million, down 8.2% year-over-year and well short of the $40 million analysts were expecting. Revenue from subscriptions declined by 14.7% year-over-year to $21.2 million, while revenue from other services rose 18.2% year-over-year.

The company reported non-GAAP net income of $4.6 million, down from $5.5 million during the first quarter of 2014. For the second quarter, Xunlei expects to report revenue between $25 million and $29 million, well below analyst estimates of $42.6 million. The midpoint of this guidance represents a year-over-year decline of 18.9%.

Now what: Xunlei stock had soared about 50% over the past month going into earnings, but declining revenue after years of growth brings into question the company's growth story. It doesn't look like things will get better for the company anytime soon, although Xunlei believes that its mobile strategy will ultimately pay off. Until then, subscription revenue from PC-related services is expected to continue to decline, in part due to increased scrutiny from the Chinese government.

The article Why Shares of Xunlei Ltd. Slumped Today originally appeared on Fool.com.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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