Sina Earnings Preview: Advertising, SME Business To Drive Q2 Results
Sina (NASDAQ:SINA) is scheduled to announce its second quarter earnings after market close on August 8. [1] Advertising revenue from sina.com and weibo.com are likely to continue to drive top line growth for the company in Q2 and in the coming quarters. The contribution of advertising revenue to Sina’s top line has increased from 79% in 2013 to 84% of net revenue in 2015. The figure stood at 82% of net revenues in the first quarter.
We expect Sina to witness 12% annual growth in revenues for the full year, with the most growth coming from advertising services. Comparatively, the company’s Mobile Value Added Services segment, which includes revenues generated by SMS, IVR (Interactive Voice Response), and gaming segment are likely to witness limited growth in the same period. Since internet penetration has increased in China, complemented by a higher mix of smartphones sold, non-advertising revenues from MVAS have fallen from about $120 million in 2009 to just about $30 million in 2015.
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The non-advertising segment has witnessed strong growth over the last few years, with revenues rising from $26 million in 2010 to $108 million in 2015. As a result, these revenues could offset the decline in revenues from the MVAS segment. This trend was visible in the March quarter earnings, with non-advertising revenues rising by about 4% to $36 million. [2]
Sina has observed healthy gross margins for both its advertising and non-advertising revenue streams in 2016 thus far, owing to a lower revenue contribution of low-margin businesses. [3] This trend could continue through 2016, due to a higher growth expected from high-margin revenue streams.
Within the advertising business, particularly on Weibo, Sina reported that the ad revenue from the small and medium enterprise (SME) customer base has been the fastest-growing segment over the past few quarters. As a result, the contribution of ad revenues from SME customers was up to 43% of total advertising revenues for the quarter, from about 22% of total advertising revenues in the year-ago period. As you can see below, the SME customer base has increasingly gained importance for Sina over the last few years. Growth in this segment should continue to drive advertising revenues in the coming quarters.
See our complete analysis for Sina.
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- Sina To Report Second Quarter 2016 Financial Results On August 8, Sina Press Release, July 2016 [↩]
- SINA Reports First Quarter 2016 Financial Results, Sina Press Release, May 2016 [↩]
- SINA Q1 2015 Earnings Call Transcript, Seeking Alpha, May 2016 [↩]