) reported second-quarter 2014 earnings of 7 cents per share, which
were much-better than the Zacks Consensus Estimate of a break-even.
Earnings were also much better than a loss of 26 cents per share
reported in the year-ago quarter.
Revenues (adjusting for deferred revenues ($4.1 million) mostly
related to the license agreements resulting from the E-House/CRIC
transaction) increased 20.7% year over year to $187 million and
were slightly higher than management's guided range of $177 million
to $182 million. Revenues were in line with the Zacks Consensus
Advertising revenues moved up 29.2% from the year-ago quarter to
$155.8 million. Advertising revenues were slightly above the higher
end of management's guided range of $152-$155 million. The
year-over-year growth was driven by Weibo advertising growth fueled
by the FIFA World Cup in Brazil.
Non-advertising revenues decreased 11.3% year over year to $28.6
million in the quarter, but surpassed management's guided range of
$25-$27 million. The decline was mainly due to lower mobile value
added services (MVAS) revenues, partially offset by the $10.0
million increase in Weibo value added services (VAS) revenues.
Weibo revenues jumped 105.4% year over year to $77.3 million.
The monthly active user for month of June grew 30% on a
year-over-year basis. The strong growth momentum of Weibo
advertising was driven by native ads, particularly for small and
medium sized enterprises, as well as Alibaba and ecommerce merchant
Portal revenues climbed 6.2% year over year to $96.3 million.
The growth was driven by an improved Internet services sector.
Gross margin increased to 60.1% from 52.1% in the year-ago
quarter. This increase was mainly attributable to a higher revenue
base and a significant jump in advertising and non-advertising
gross margin. A favorable product mix of higher margin Weibo
advertising and value-added-services backed the increased.
Operating expenses as percentage of revenues flared up 20 basis
points (bps) to 67.3%. The sharp rise was mainly due to 41.9%
higher selling & marketing expenses and 15.6% higher product
development costs, partially offset by 8.3% lower general &
However, the steep rise in operating expenses negatively
impacted profitability. The company reported operating loss
(including stock-based compensation) of $12.8 million, narrower
than a loss of $22.9 million in the year-ago quarter.
SINA reported net income was $4.6 million or 7 cents compared
with a loss of $17.4 million or 266 cents per share.
SINA exited the second quarter with cash, cash equivalents and
short-term investments of $2.30 billion compared with $1.81 billion
at the end of the first quarter. Cash provided by operating
activities in the second quarter was $9 million.
SINA expects revenues for the third quarter of 2014 in the range
of $193 million to $199 million. Management believes that
increasing investment by Weibo on product development and marketing
will hurt its as well as SINA's operating results in 2014. SINA
expects to invest further in its own portal (mobile and video) that
will also keep margins under pressure.
We believe that SINA remains a premier company based on its
strong product pipeline, continuous investments in product
development and marketing and a robust user base for its e-Commerce
and Weibo offerings.
However, the recent licensing issue with the Chinese government
is a major headwind, which will negatively impact brand revenues in
the near term. Although the investments in mobile and video are
long-term positives, these will hurt profitability for the rest of
Moreover, Weibo is expected to face stiff competition from the
likes of WeChat in China, which will hurt its user base. We believe
that Weibo's monetization ability will be a major driving factor
for SINA amid increasing competition from the likes of Sohu.com
), NetEase (
) and Youku Tudou (
) in the video and brand advertising market.
Currently, SINA has a Zacks Rank #3 (Hold).
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