SINA's Q3 Earnings & Revs Beat Estimates - Analyst Blog

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SINA Corp ( SINA ) reported third-quarter profit of 35 cents per share (including stock-based compensation), exceeding the Zacks Consensus Estimate of 17 cents cent per share.

Revenues

Revenues jumped 21.2% year over year to $184.6 million and were much better than management's guided range of $176.0 million to $180.0 million. Revenues also beat the Zacks Consensus Estimate of $181.0 million.

The year-over-year growth in revenues was primarily driven by higher revenues from online advertising and fee-based services. Advertising revenues moved up 25.7% from the year-ago quarter to $151.6 million. Advertising revenues were within management's guided range of $151.0 million-$153.0 million.

Non-advertising revenues increased 4.7% year over year to $28.4 million in the quarter, ahead of management's guided range of $25.0 million-$27.0 million. Mobile value-added services (MVAS) revenues were $13.5 million, down 29.5% from the year-ago quarter.

Operating Results

Gross margin increased 950 basis points (bps) from the year-ago quarter to 64.0% due to higher revenue base and increase in gross margin of the advertising and non-advertising business.

Operating expenses increased 19.6% from the year-ago quarter. The sharp rise was primarily driven by higher product development cost (up 28.8%) and general & administrative expense (up 15.9%).

Operating income was $18.8 million, recovering from a loss of $2.5 million in the year-ago quarter. The recovery was primarily due to increase in revenues and gross margin expansion. Net income improved to $23.8 million or 35 cents per share in the quarter from $5.4 million or 8 cents in the year-ago quarter.

Balance Sheet

SINA exited the third quarter with cash, cash equivalents and short-term investments of $1.22 billion compared with $1.24 billion at the end of the second quarter. Cash provided by operating activities for the third quarter was $12.3 million .

Outlook

SINA expects revenues for the fourth quarter of 2013 to be in the range of $190 million and $194 million. Advertising revenues are expected in the range of $160.0 million-$162.0 million, while non-advertising revenues are projected in the range of $30.0 million-$32.0 million.

Recommendation

SINA reported solid third quarter results, with both earnings and revenues exceeding the Zacks Consensus Estimate. 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. In this regard, the partnership with Alibaba Group is expected to boost SINA's position in the Chinese e-commerce market.

However, increasing competition from Sohu.com Inc. ( SOHU ), Yahoo ( YHOO ), NetEase ( NTES ) and Tencent will hurt profitability over the long term. Further, we believe that increasing regulations imposed by the Chinese government may put some pressure on the stock.

Currently, SINA has a Zacks Rank #2 (Buy).



NETEASE INC (NTES): Free Stock Analysis Report

SINA CORP (SINA): Free Stock Analysis Report

SOHU.COM INC (SOHU): Free Stock Analysis Report

YAHOO! INC (YHOO): Free Stock Analysis Report

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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 , Business , Earnings , Stocks

Referenced Stocks: NTES , SINA , SOHU , YHOO

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