Great Trades

Great stock trades based on fundamentals and technical analysis.

Thursday, February 02, 2006


REDF Sell Opportunity (REDF) reported EPS of 1.23 cents per ADS this morning. Yes, that's 1.23 cents, not $1.23. News wires misakenly ran a headline of $1.23 earnings, which they later corrected. However, while the stock spiked up as much as $3 to $23.85 on the earnings headline, it still is trading over $2 higher in premarket, near $23, despite what we view as a horrible earnings report.

On January 25, REDF was trading at $15. That night, Jim Cramer, on his CNBC show "Mad Money," hyped redf as the Google of India. The stock immediately traded over $20 on frenzied buying.

While India is a huge country, with lots of potential for growth for an internet company, REDF was only able to grow registered users by 18% over the previous year. For a stock trading at a PE of about 450, 18% user growth is abysmal. Google apparently is being aggressive in the Indian market. REDF should be trading well down on this earnings report, not up. Buyers on the mistaken headline will likely be very sorry. (By comparison, our Asian favorite CNTF is trading at a PE of about 16 x 2005 EPS and has a revenue growth rate well over 100% in China, a bigger market than India.)

Despite Jim Cramer's rants about REDF, we at Great Trades are initiating REDF with a Sell rating, for both the short term and the long term.

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Disclaimer: Great Trades may have a position in all or some of the stocks discussed in this blog, but is not paid by any company to promote their stock. Great Trades contains opinions, none of which constitute a recommendation that any particular security, transaction, or investment strategy is suitable for any specific person. Great Trades does not provide personalized investment advice.

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