ChinaNet Online Holdings (CNET) is flashing on our radar today, as CNET stock is getting hit hard. Lets be clear. CNET stock is a speculative play, but it is getting pounded hard today. Let us discuss.

First, we have to realize that yesterday prices jumped dramatically thanks to a cryptocurrency buzz. So this is simply profit taking. Bulls should relax, but you SHOULD take SOMETHING off of the table here.

So why did it jump in CNET stock? Simple.

The stock rocketed up 150%, more than doubling its market cap to $36 M, after announcing its own blockchain move — a strategic partnership with Wuxi Jingtum Network Technology.

The two companies will exchange work in order to jointly develop blockchain applications, they say. So what does this mean:

Jingtum says its system is a “decentralized and ecologically interactive Internet trading network based on blockchain technology.”

The two will work to build a platform for “business opportunities and transactions.”

In its last quarter we covered, total revenues increased to $10.5 million from $8.4 million in the prior year, primarily due to the increase from search engine marketing and data service revenue during the quarter.

During the quarter, revenues from internet advertising and data services was $2.5 million, which decreased 56.7% from $5.7 million in the second quarter of 2016. ChinaNet continues to focus on integrating and upgrading its internet advertising and data service to SME clients and investing in developing new service modules for clients, and believes that the launch of new services in future will help to increase market penetration and recurring revenues. The decline was offset by an increase in search engine marketing and data service revenue of 188.9% from $2.8 million in the second quarter of 2016 to $8.0 million in the second quarter of 2017. This increase was supported by the CloudX system, which drove more precision marketing and ROI for clients.

Gross profit for the quarter ended June 30, 2017 was $1.7 million, compared to $2.5 million in the second quarter of 2016, a decrease of 31.9%. Gross margin was 16.2%, down from 29.6% in 2016, primarily due to the increase in relative lower margin revenues from search engine marketing and data service during the quarter. Internet advertising and data service gross margin remained 43% in the second quarter of 2017 as in 2016.

Operating expenses decreased by 39.1% to $2.1 million for the three months ended June 30, 2017. Sales and marketing expenses decreased by 22.4% to $0.8 million. General and administrative expenses decreased by 45.9% to $1.0 million. Loss from operations was $0.4 million in the second quarter of 2017, an improvement of 57.3% compared to a loss of $1.0 million in the second quarter of 2016.

Net loss attributable to ChinaNet for the three months ended June 30, 2017 was $0.8 million and loss per share from continuing operations was $0.07, compared to a net loss of $1.3 million and loss per share from continuing operations of $0.11 in the second quarter of 2016. The weighted average diluted shares outstanding for the three months ended June 30, 2017 was 12.0 million shares versus 11.4 million for the three months ended June 30, 2016.

We recommend taking profits from any initial investment, and letting the rest run.

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