Sina (NASDAQ:SINA) will announce its earnings for Q1 2012 on May 15. Sina is primarily an online media company which also offers mobile value-added services in China. It operates online news and content through Sina.com, a Twitter-like microblog – Weibo.com, and Mobile Value Added Services (MVAS). Sina makes money primarily through its display advertising and mobile value added services. The company faces competition in different verticals from Internet giants such as Baidu (NYSE:BIDU), Tencent and Sohu (NASDAQ:SOHU) and other companies.
We currently have a $65 Trefis price estimate for Sina, which stands nearly 20% above its current market price.
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Advertising business may experience turbulence
While China’s online display advertising market has steadily increased in the past couple of years, we expect it to show a slowdown in 2012, as indicated by the relatively weak results of Sina’s main competitors in the business – Baidu and Sohu. We already predict a decline in Sina’s display ad market share in China, which when combined with a decline in the overall market could lead to significantly lower ad revenues in the coming quarters.
You can check out how any decline in China’s online display advertising market would impact Sina’s value by tweaking the chart above.
Weibo + monetization = $$$
Weibo is one of Sina’s largest online properties, and the company is still trying to figure out how to effectively monetize Weibo besides just plain display advertising.
While the recent Chinese government crackdown on social network users in China may impact Weibo’s long-term growth, we expect Sina to generate increasing amounts of revenue from Weibo in the near future, through advertising, premium enterprise account subscriptions, and locally targeted ads on mobile devices.
We expect Weibo to become one of Sina’s biggest money makers in the coming years as its huge user base is leveraged by Sina to generate additional revenue, going forward.
Sina’s operating expenses were at an all-time high in 2011. We expect Sina to eventually clamp down on its expenses and widen its profit margins. If Sina is unable to control spending, that could mean a significant downside to its stock.