Sina frenzy in Chinese Internet space

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Opportunity or trap? The news of Alibaba buying 18% of Sina ( SINA , quote ) who has a core foothold in the micro-blogging space has not only Sina but others in the Chinese Internet sector booming.

The combination of blending the Sina and Weibo platform with the ability of Alibaba in ecommerce along with electronic payments presents an interesting opportunity for this China heavyweight.

A quick look at some core names in the space with some of my thoughts:


The move today brings a breakout in the China internet indices overall after months of range bound charts after lows of December. The Chinese internet sector was under the cloud of an SEC investigation into the lack of transparency into accounting practices.

The sector multiples have come down dramatically in some cases as leaders are challenged by changing landscape to mobile and power of Twitter and online video losing luster.

This dynamic is a microcosm of what has and will continue to play out in the U.S. with Google ( GOOG , quote ), Apple ( AAPL , quote ), Microsoft ( MSFT , quote ), etc.

Core Stocks:

SINA ( SINA , quote ) - they own Weibo which is Twitter in China.  Huge growth and first mover locally and has a cultural advantage. The $57 level is a major level for the stock and right where it shot to this morning before pulling back.  I'd be cautious at these levels and with a 95X P/E, despite that the integration with Alibaba is very positive for both companies. This is a powerhouse ecommerce and online payment combo player now.

Baidu ( BIDU , quote ) - There is  very good support for the stock at $81-83 level and this could be a place to buy but with a need for a tight stop within 5% of your entry. The shares are cheap at 15X but this may be a signal that the multiple is going lower after years trading around 60x P/E when the net was growing in line.

Growth has gone from 50-70% over a decade to 8% in Q1 and will be a continued issue for investors. Like Google, BIDU is spending a lot of money to maintain their market share in search as mobile becomes the dominant medium.

Sohu ( SOHU , quote ) - This is the 3rd largest search engine.  They just announced Q1 numbers this morning and they are beating on ad sales. A 23x P/E multiple is fair for this company.

Youku Tudou ( YOKU , quote ) - This is the " YouTube of China".  They have never made money and it's difficult to get excited on the stock until they can monetize their position in the marketplace. This was $67 stock in April 2011, now trades at $20.0.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , International , Stocks

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