On Friday KongZhong Corporation (NASDAQ:KONG) shares fell 11% and finished the day $1 above their 52-week low.  Now that KONG has fallen, it sits defeated at $4.59 a share after Q1 profit fell a dreadful 94%.  Is there any hope for this beat up stock?

KONG is still a top Chinese wireless entertainment provider, they managed to raise revenue 6.3 percent to $21.4 million, with wireless value-added services revenue rising to $21.1 million from $20 million.

That news was brushed off after announcing that for Q1 they earned $88,000, breaking even on a per-share basis. The company earned $1.6 million, or 4 cents per share, in the year-ago quarter.

KongZhong also reported operating expenses for these services rose 10 percent sequentially to $7.4 million, primarily because of increased compensation to company employees. The company’s total operating expenses rose 8.5 percent year over year to $10.7 million.

KongZhong forecast second-quarter revenue of between $22 million and $23 million.

(Via Forbes.com) Piper Jaffray analyst Michael J. Olson called the company’s results “mixed,” saying he thinks its profit was impacted by investment in the ongoing rollout of the company’s wireless application protocol, or WAP, portal Kong.net.

“While the strategy is an important one for KongZhong in the coming years, the investment is significant and we believe the company will not see a material impact from the rollout until (calendar year 2009),” he said.

Olson rates the stock “Neutral” with a $5.50 price target.

Let’s face it Masters, the love affair with Chinese stocks is over for the time being, after KONG made a comeback in October, it’s been downhill.

KongZhong Corp.

4.59  -0.59

Kong is done for the moment, but the company isn’t dead, they’ve just lost Wall Street’s faith.  The Masters are going to keep an eye on KONG shares and if it does hit a new 52-week low, we’ll make a position.  Over the next few weeks expect the day traders to have a field day taking short term gains and pushing the stock up and down 5 to 10%.

Analysts surveyed by Thomson Reuters were expecting earnings of a nickel a share, so they missed by 2 cents, but that net loss was just too much to handle for investors.

KongZhong gets plenty of press for a small cap stock and the average volumne of 218.89K shares makes it a good investment to get in and get out.  I would like to see KONG put itself up for sale and should shares continue downward, it could happen.

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