Sina Continues Growth Spree With Weibo Driving Top Line Growth, Profits

Sina (NASDAQ:SINA) announced its third quarter earnings on Tuesday, November 7, reporting a 61% annual increase in net revenues to $443 million. Revenue growth was driven by both the Advertising segment, which includes display ads on Sina and Weibo; and Non-Advertising Revenues, which include value added services on weibo.com.

Additionally, Sina’s company-wide gross margin (GAAP) for the quarter improved by 8 percentage points to 75% for the quarter – a trend consistent over the last few quarters. The gross margin improvement was also driven by both the advertising and non-advertising businesses. A relatively smaller increase in operating expenses led the EBITDA margin to expand by around 13 percentage points, with net income growing three times over the comparable prior year period.

We are in the process of revising our $78 price estimate for Sina’s stock, which is around 25% lower the current market price. Sina’s stock price has surged by over 80% since the beginning of the year due to a strong set of results in recent quarters, complemented by a healthier balance sheet.

See our complete analysis for Sina

Weibo Drives Growth In Ad Revenues

Within the advertising segment, Weibo has been instrumental in driving growth for the company in recent years, while portal advertising revenues on Sina’s platforms struggled in recent quarters. The company has consistently reported strong growth in Weibo ad revenues over the past few quarters due to the increasing popularity and strong monetization potential of the social media platform. Weibo’s ad revenues were up by 77% y-o-y to $277 million. Through the year, Weibo ad revenues have surged 74% y-o-y to $664 million. Comparatively, portal advertising revenues rose by around 11% year-over-year to $87 million for the quarter, while year-to-date portal ad revenues have remained flat over 2016 levels at around $225 million.

Profits Driven By Strong Revenue Growth

Sina has successfully improved its gross profit margin for both the advertising and non-advertising businesses, as shown below. While ad revenues jumped 56%, gross profits were up 70% driven by a healthier gross margin. Similarly,  the non-advertising gross profits also surged in the September quarter. This trend has been evident through the year, with the company’s gross profit margin improving by high single-digit percentage points.

In addition to improvement in gross profit margin, Sina has improved its operational efficiency due to a large fixed operating cost base. As a result, there has been a limited (at least relatively) increase in cash operating expenses. Correspondingly, Sina reported a solid increase in operating profit margin and net income levels, as shown in the table above. This trend is expected to continue through the end of the year, with Sina’s full year diluted EPS expected to be 100% higher on a y-o-y basis at $2.94, according to Yahoo Finance consensus estimates.

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research