Xunlei Ltd. Stock Analysis: Is the Rally Set to Continue?

Xunlei Limited (NASDAQ: XNET) is a Chinese technology company specialising in distributed cloud services, offering products across cloud acceleration, blockchain, shared cloud computing, and digital entertainment.

Recent Financial Performance

As of the fiscal year ending December 31, 2023, Xunlei reported total revenue of $363.72 million, marking a 6.5% increase from the previous year. Gross profit for the same period was $163.07 million, up from $141.44 million in 2022. The company's net income stood at $14.22 million, a decrease from $21.46 million in the prior year.

Key Financial Metrics

• Earnings Per Share (EPS): $0.23 over the last 12 months. ​

• Price-to-Earnings (P/E) Ratio: 22.30, lower than the Computer and Technology sector average of 41.36, suggesting a more favourable valuation relative to peers. ​

• Price-to-Book (P/B) Ratio: 1.04, indicating the stock is trading close to its book value. ​

Stock Performance

Over the past year, Xunlei's stock has experienced significant volatility, with a 52-week range between $1.28 and $2.09. As of December 30, 2024, the stock was trading at $2.14, reflecting a 25.49% increase over the year.

Liquidity and Financial Health

The company maintains a strong liquidity position with $272.03 million in cash and cash equivalents and total debt of $14.64 million, resulting in a net cash position of $257.40 million, or $4.06 per share.

Xunlei Ltd. (NASDAQ: XNET) has been making headlines, currently trading at approximately $5.12 per share—a staggering 147% gain since the start of the year. But the key question remains: Can this momentum sustain, or is a pullback imminent?

Historical Stock Trends: A Pattern to Watch

A look at Xunlei’s price history reveals a recurring pattern: when the stock surges sharply at the beginning of the year, it tends to decline for the remainder of the year. This has occurred multiple times, suggesting that investors should proceed with caution.

Technical Analysis: RSI Signals Overbought Conditions

One major indicator to watch is the Relative Strength Index (RSI) on the monthly chart, which now suggests strong overbought conditions. This could trigger profit-taking, leading to potential short-term pullbacks.

Key Resistance Levels & Potential Upside

• First Resistance Level: $6.96 – A breakout above this level could ignite momentum trading, potentially leading to further gains.
• Next Major Target: If the rally extends, the stock could test its 2021 peak of $11.20.

Risk vs. Reward: Is It Worth Buying Now?

Despite its recent gains, the risk-to-reward ratio is not currently favourable. Overbought conditions and historical trends suggest that investors should exercise caution and watch for potential pullbacks or consolidation before considering new positions.

 

Conclusion

Xunlei Limited demonstrates steady revenue growth and maintains a strong liquidity position. However, the decline in net income and limited analyst coverage suggest a cautious approach. Potential investors should consider these factors alongside the company's market position and future growth prospects.