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Sina’s (SINA) troubles may be far from over as China’s economy suffers

By Staff Correspondent |
emerging stock buy or sell small-cap profile

When Sina Corporation (NASDAQ: SINA) reported mixed results for the last quarter, the market’s response was not very encouraging, at a time when the China-based internet company is feeling the heat of economic slowdown. The unexpected fall in advertising revenue triggered a selloff last month and the stock slipped to a new low.

Related: SINA Q4 2019 Earnings Conference Call Transcript

It is expected that the conditions would remain the same at least until the next earnings release, which is due in May. Initial estimates show that Sina had a weak start to fiscal 2020, in terms of revenue performance and profitability.

Weibo Counts

Nevertheless, positive contributions from the fintech segment could be a morale booster for shareholders. Also, there are signs of recovery at Weibo Corporation (WB), the microblogging platform that was spun off a few years ago in an IPO but continues to be a key revenue generator for Sina. Being one of the top players in the segment, Weibo should be able to outsmart competitors like Baidu (BIDU) and Bilibili (BILI), going forward.

Weibo accounted for about two-thirds of the total revenues in the fourth quarter, which is down from the year-ago period as enterprises continue to reduce ad spending due to the weak macros. Meanwhile, there was a marked increase in the contribution from fintech.

Outlook

These factors might help the company bounce back and create value for shareholders in the long term. What it implies is that buying Sina’s stock right now might not be a good idea, especially considering the increased risk in the wake of the coronavirus outbreak. The same goes for Weibo, as well as most of the Chinese tech firms.

However, analysts are not very optimistic about the stock’s near-term prospects. They advice prospective buyers to wait and watch before owning the stock, though a long-term recovery is very much on the cards.

Mixed Q4

In the fourth quarter of 2019, adjusted earnings rose to $1.17 per share and exceeded analysts’ forecast. Revenues moved up 4% annually to $593 million as a sharp increase in non-advertising revenues more than offset a decline in advertising revenues.

Also read: Baidu Q4 earnings beat, expects Q1 results to be hit by Coronavirus

Sina’s shares, which have been in a free fall for more than two years, closed the last trading session at a five-year low of $33.6. The stock has lost about 24% so far this year.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

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