Here’s Why We Think Sina’s Stock Is Valued At $46

Sina‘s (NASDAQ:SINA) stock has dropped by around 30% over the past three months, following the decline in the broader Chinese equity market. Notwithstanding the macro risks present in the Chinese economy, our price estimate for SINA stands at $46.30. This represents more than 20% premium to the current market price. We believe there are several positives in the company’s business.  Firstly, its Weibo platform continues to command high popularity in the Chinese market, which is recording higher levels of engagement. Secondly, Sina has been able to effectively transition itself onto the mobile platform, where revenues are growing at a solid pace. Thirdly, the company’s efforts to attract smaller businesses and expand into vertical areas (such as finance) could mitigate some of its risks in the coming future, in our view.

See our complete analysis of Sina here

User Base On Weibo Continues To Surge: Recently, user base growth accelerated on the Weibo platform:  the number of monthly active users (MAUs) and daily active users (DAUs) were seen at 212 million and 93 million, respectively, on Weibo during Q2 2015. ^[1] User growth came mainly from a younger audience and from people from lower-tier cities, which effectively reaffirms Weibo’s popularity among the Chinese audience. The recent rise in engagement also reduces some of the risks associated with increased competition from other social platforms such as WeChat.

Transition To The Mobile Platform Has Been Strong: Sina has transitioned itself effectively on the mobile platform — during Q2 2015, mobile MAU’s and DAU’s on Weibo rose by 46% and 45%, respectively, outpacing growth in the overall audience. Similarly, the number of unique visitors on Sina’s mobile portal grew by 47% year over year in June 2015. ^[1] The company has also been able to complement this transition with success on the monetization front — the share of mobile devices in Weibo advertising revenues was recorded at 62% in Q2 2015, as compared to 39% in Q2 2014. And in the portal business, mobile advertising revenues surged by 285% annually during Q2 2015. ^[1]

Increased Adoption By SME Advertisers Mitigates Risks: While the current weakness in the Chinese economy is mainly impacting business from large brand advertisers, Sina has been able to gain a higher share of its overall business from small to medium sized enterprises (SMEs). This somewhat mitigates the risks for Sina in the coming future. During Q2 2015, SMEs accounted for 39% of overall advertising revenue on Weibo. Increased participation by such customers (which mainly utilize self-service advertising tools) also results in higher gross margins in the business.

Portal Business Is Improving: We believe that Sina’s portal business is showing some signs of improvement — while the number of mobile visitors to the portal has risen considerably in the past, the decline on the PC platform also slowed down on a year-over-year basis during the most recent quarterly results. In addition, non-advertising revenues (in non-GAAP terms) on the portal rose by 35% in Q2 2015 as a result of vertical expansion. ^[1] We believe such revenues could continue to grow over the coming quarters due to ongoing efforts by Sina to expand its portal business in areas such as finance and real estate.

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1. Sina Corporation’s (SINA) CEO Charles Chao on Q2 2015 Results – Earnings Call Transcript, Seeking Alpha, August 19, 2015 [↩] [↩] [↩] [↩]