An Overview Of Sina’s 2017 Performance

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SINA
Sina

Sina (NASDAQ:SINA) has been one of the fastest-growing stocks this year, with most large internet companies performing well through the year. Sina has reported strong double digit growth in revenues and a massive improvement in margins so far in 2017. A strong set of results in recent quarters was complemented by the company reducing its debt load, contributing to a healthier balance sheet. It is interesting to note that cash (net of debt) on Sina’s balance sheet makes up around 50% of the company’s total valuation, per Trefis estimates.

Sina reported a solid 51% annual increase in net revenues to $1.1 billion through the first three quarters of the year. 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 (non-GAAP) for the year thus far has improved by 10 percentage points to 74%, with consistent improvement through the three quarters. The gross margin improvement was also driven by both the advertising and non-advertising businesses.

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In addition to improvement in gross margins, 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. Non-GAAP operating expenses were up “only” 30%, which led the adjusted EBITDA margin to expand by around 16 percentage points to 30% this year. Non-GAAP operating income was up over 3x to $236 million, as shown above. Sina’s reported non-GAAP net income and earnings per share were up 140% to $148 million and $1.97, respectively.

Weibo Drives Ad Revenue Growth

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 have surged by 73% y-o-y to $664 million this year. Comparatively, portal advertising revenues have remained flat over 2016 levels at around $225 million.

Sina has successfully improved its gross profit margin for both the advertising and non-advertising businesses, as shown above. While ad revenues jumped 47%, gross profits were up 70%. Similarly,  the non-advertising gross profits also rose 11 percentage points through the year. This trend is expected to continue through the end of the year, with gross profits outpacing top line growth.

In terms of future growth prospects, Weibo is expected to continue to drive growth for Sina. However, Sina’s management announced that the company will reduce its stake in Weibo from 49% to 46% effective from July this year. Sina’s voting rights have remained at around 72% despite the slight reduction in stake. A key reason for this stake reduction is that Sina’s portal ad business is a slowing business, which could potentially weigh on Weibo’s growth. This was a slight dampener on what was overall a very positive year for the company. In the wake of this, it is key for Sina to improve monetization on its portal platforms. Within the portal advertising segments, the contribution from small and medium enterprise (SME) customers was crucial to growth (read more: How Crucial Are Small & Mid-Sized Businesses For Sina’s Advertising Business?).

We have an $83 price estimate for Sina’s stock, which is around 20% lower than the current market price. You can modify the interactive charts in this article to gauge how changes in individual drivers for Sina can have on our price estimate for the company.

See our complete analysis for Sina

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