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SINA Moves Higher on Earnings and Revenue Beat in Q3

Shares of SINA Corp.SINA surged 4.48% yesterday after the company reported better-than-expected quarterly results. The company reported third-quarter 2015 earnings of 15 cents per share, which outpaced the Zacks Consensus Estimate of 8 cents. Earnings were also better than 11 cents per share reported in the year-ago quarter.

Sina Corp (SINA) - Earnings Surprise | FindTheCompany

Quarter Details

Revenues increased 13.9% year over year to $226.3 million and were higher than management's guided range of $193 million to $199 million. Revenues also surpassed the Zacks Consensus Estimate of $220 million.

Advertising revenues moved up 16% from the year-ago quarter to $193.5 million. The year-over-year growth was primarily driven by strength in Weibo advertising, which increased 62% year over year to $105.9 million.

Non-advertising revenues increased 3.2% year over year to $32.8 million in the quarter. The increase was driven by strength in the portal's new business. Revenues from Weibo value added services (VAS) remained flat year over year at $18.9 million.

Weibo revenues jumped 48.3% year over year to $124.7 million. Monthly active users increased 33% year over year in the quarter to 222 million. Daily active users for Weibo came in at 100 million at quarter-end. The strong growth momentum of Weibo advertising was driven by increasing adoption of mobile devices and improved monetization, particularly for small and medium sized enterprises.

Portal revenues declined 11.3% year over year to $101.6 million. The decline was owing to the sluggishness in Portal Advertising.

Gross margin remained flat on a year-over-year basis at 63%. Though gross margin benefited from a higher revenue base and increase in advertising margins, it was offset by lower non-advertising gross margin.

Operating expenses as percentage of revenues declined to 56.8% from 68.3% in the prior-year quarter. The decline was because of lower selling & marketing and general & administrative expenses.

Lower operating expenses in the quarter contributed to the company's profitability. SINA reported operating income of $14.7 million in the quarter, in contrast to a loss of $10.9 million in the year-ago quarter.

Balance Sheet and Cash Flow

SINA exited the quarter with cash, cash equivalents and short-term investments of $1.9 billion compared with $2.2 billion on Dec 31, 2014.

Cash provided by operating activities in the quarter was $107.1 million.

Our Take

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. The company has also made some strategic investments in sectors like Internet finance, which has seen some positive developments and can be significant growth drivers going ahead.

However, the company is expected to see some headwinds owing to the weakness in traditional brand advertising, especially for its portal. In addition, the company faces some challenges in its display advertising business owing to the ongoing transition from brand advertising to performance-based advertising.

In addition, SINA's business can be affected by significant restrictions on online search and other social-networking activities in China.

Moreover, Weibo is expected to face stiff competition from the likes of WeChat in China, which can hurt its user base. However, we believe that Weibo's monetization ability will be a major driving factor for SINA amid increasing competition from the likes of Sohu.com Inc. SOHU and NetEase NTES in the video and brand advertising market.

Currently, SINA has a Zacks Rank #3 (Hold). A better-ranked stock in the technology space is MeetMe MEET , which sports a Zacks Rank #1 (Strong Buy).

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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 Nasdaq, Inc.


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

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