Earnings Make SINA Corp (SINA) a Strong Buy: Facebook Inc (FB), Baidu.com, Inc. (BIDU)

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SINA Corp (NASDAQ:SINA) has comprehensively beaten earnings estimates with its recent quarterly results. The company continues to do well in a weak economy and an increasingly competitive market. It faces competition for advertisement revenues from companies such as Baidu.com, Inc. (NASDAQ:BIDU), Facebook Inc (NASDAQ:FB) and Twitter. I believe the stock is still a buy despite recent rallies and is an ideal investment to benefit from growth in online advertisement.


Sina is China’s largest provider of social and mobile value added services. The company has 3 primary platforms which are SINA.com, Weibo.com, and SINA Mobile. Sina.com is a media channel which provides updates on news, sports, finance, entertainment, luxury, videos, music etc. Sina’s micro blogging platform, Weibo.com, is pretty similar to Twitter. It allows users to follow topics, discussion and notable celebrities etc. SINA Mobile is a portal for downloading ring tones, mobile games, pictures and also provides access to dating and friendship communities. Other important products being offered by Sina include SINA Game, SINA eReading, SINA.net, SINA Mall.


Sina reported its 4th quarter earnings on Tuesday. The market was expecting the social media company to report an EPS of $0.05 on revenues of $133.9 million. The company stock jumped approximately 6% after it comprehensively beat EPS estimates, reporting a profit of $0.13 over revenues of $139.1 million. Although higher than estimates, this was still a 39% decline y/y and if we include extraordinary items the EPS comes down to a meager $0.03 per share. The net income has decline from $9.3 million in the same quarter last year to $2.4 million in 4Q2012. This rally on earnings still only partially offsets the 13% percent Sina stock depreciated in the 4th quarter.

The Chinese markets have been showing higher growth rates as compared to Europe and North America. This is both due to a combination of better economy and the fact that Chinese markets are still not mature. According to iResearch the Chinese online advertisement market grew by 57.6% last year and a healthy 46.8% in 2012. This allowed Sina to easily meet its overall revenue projection for the quarter with advertisement revenues of $110.7 as compared to its own guidance of $110-$112.

A major reason for the earnings rally was the positive outlook for the next quarter. Sina expects revenues for 1Q2013 to be in the range of $115-$119, which is pretty much similar to street expectations of $117. The company also expects to generate approximately 81% of its total revenues from advertisement, as compared to 79% in 4Q2012.

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