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China Finance Online Co. (NASDAQ: JRJC) is up around 8% Monday in late morning trading. With no news to speak of, the price movement and nearly 400,000 shares of extra trading volume over the stock's average beg the question, why?

As the company's name suggests, Beijing-based China Finance Online provides financial data through the Internet in the People's Republic of China. Through numerous subsidiaries, it offers simple company data as well as “subscription-based services” like stock picks and newsletters. Talk about vertical integration, China Finance Online even owns an 85% interest in a Hong Kong brokerage firm.

Like Chinese Internet media company Sohu.com Inc.'s (NASDAQ: SOHU) more than 11% jump Monday and Chinese Internet search company Baidu.com, Inc.'s recent large gains, Wall Street is very bullish on Chinese Internet stocks.

As previously reported here, this optimism is understandable: The state-run China Internet Information Center recently reported that China will surpass the U.S. as the nation with the largest number of Internet users sometime this year. China recorded a staggering 53% increase in users from 137 million in December 2006 to 210 million in December 2007.

Importantly, however, as the U.S. found during its own Internet bubble, user growth doesn't necessarily translate to revenue or profits. With total revenue of only $25.9 million and no net profit for 2007, China Finance Online's $438 million market capitalization seems a little steep – though its projected price-earnings-ratio on 2008 earnings is only around 20.

Certainly the Chinese Internet sector offers lots of opportunity, but with prices fueled by optimism and projections, buyer beware.

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