Wednesday, March 2, 2011

Sina (SINA) Hit on Small Beat and Inline Guidance - Weibo Users Double to 100M

You can tell how much mind share a company is getting by the number of news outlets that report it's earnings.  For a long time Sina (SINA) barely received any attention, but based on how many different outlets reported on its earnings, this company has definitely hit the big time in terms of attention.  The company reported ok results, essentially a small beat in EPS and in line guidance. (Full report here)  It was already very expensive after a huge run up (doubling) in latter 2010 and early 2011, as it is being valued not so much on its underlying business but the potential in Weibo ("Twitter of China").  On that end the user base has doubled in short order (4 months) to 100M users and is fast approaching the size of Twitter itself.  But for now there is no monetization of that service so the stock will appear to be quite pricey.  (keep in mind, Twitter is being valued somewhere in the $7 to $10 BILLION range in the private market) There does appear to be some first efforts at monetization coming in the 2nd half of this year.  Bigger picture, from this seat I'd love to see an spin off IPO in 2012 of Weibo.
  • Chao said Sina will further pursue partnerships with e-commerce startups and consider offering an e-commerce advertising platform on its microblog, or payment services for e-commerce companies. 

Technically the story for Sina is very different from 2 weeks ago when there was not a care in the world and the stock surged to the mid $90s.  Since then, there have been two gap downs, $20 of losses, and a break of the critical 50 day moving average.  $75 is the recent low and if that breaks there could be some more prominent downside - that said, it would offer long term oriented investors the first attractive opportunity in a few months if we another major tumble.  Any move down to the 200 day moving average would be very appealing for entry.

One very interesting move is the intent to purchase a 19% stake in Chinese online apparel maker Mecox Lane (MCOX) for $66M.  Hmmm... that came out of left field.
  • China's biggest Internet portal also said it will pay $66 million to buy a stake in Chinese fashion e-commerce company Mecox Lane Ltd. (MCOX) as the company explores further ways to participate in China's booming e-commerce industry. It will buy the shares from Maxpro Holdings Ltd. and Ever Keen Holdings Ltd., both units of Sequoia Capital. 

Via IBD:
  • China Web portal Sina (SINA) late Tuesday reported Q4 results that edged views, but swung to a net loss on a big impairment charge. The company's per-share profit minus items jumped 48% from the year-earlier quarter to 46 cents. That beat the 45 cents expected by analysts polled by Thomson Reuters. Sales rose 12% to $110 million, where analysts were expecting $104.4 million.
  • For the current quarter, Sina said it expects revenue excluding certain items of $93 million to $96 million. Analysts were expecting $95.2 million, but it was unclear if that also excluded the same items
  • The company said its ad revenue last quarter jumped 30% to $82.5 million from $63.2 million in Q4 2009. It expects Q1 ad revenue of $71 million to $73 million.  The expected drop in revenue from Q4 to Q1 is seasonal, says Mike Hickey, a Janco Partners analyst who rates the stock a buy.
  • "The first quarter is actually not good for advertising because people are offline spending time with their families during the Chinese New Year celebration, so seasonally it's the lowest point in advertising spend," Hickey said.
  • The company's stock has doubled since late August to more than 80 but is down 14% since mid-February, as Goldman Sachs cuts its rating to neutral from buy. Goldman cast doubt about when Sina's Weibo microblog will generate revenue.
  • "2010 has been a year of transformation for Sina," Chao said. Besides ad growth, "we have successfully built Sina microblog Weibo into the largest and most influential social media platform in China, with user base increasing by more than 25 times in 2010."
  • Weibo has more than 100 million users, a figure he says doubled in the past four months. The service is "the centerpiece of Sina's new media growth strategy," Chao said.  Sina hopes Weibo will bring users and software developers that offer value-added services. It expects advertisers then will follow.
  • Investors are having a hard time trying to value Sina because its microblog still hasn't generated any revenue, says Hickey.  "But in the future, it could be an incredibly valuable asset," he said.
  • China's government likely remains the biggest hurdle for Weibo, Hickey says. "There is concern that the government is going to come in and tighten its grip on those sort of platforms like Weibo and that has taken the top off the stock (since mid-February)," he said.
  • For Q4, Sina reported a net loss of $100 million, or $1.51 a share, including a write-down of $128.6 million related to an impairment of an equity investment in a Chinese real estate entity called CRIC.
[Feb 18, 2011: BW - A Twitter Knock Off has China Talking]
[Feb 16, 2011: Goldman Sachs - Sina Cut to Neutral; Says Weibo Fully Valued]
[Jan 31, 2011: Results Should Bode Well for Sina,com]
[Jan 11, 2011: Word is Getting Out on Sina's Secret - Weibo]
[Dec 9, 2010: The Twitter of China - Weibo]

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