Sina Earnings Preview: Weibo And Portal Ad Revenues To Drive Results

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Trefis
SINA: Sina logo
SINA
Sina

Sina (NASDAQ:SINA) is scheduled to announce its Q4 and full year earnings on February 13. Sina has reported strong double digit growth in revenues and a massive improvement in margins through the first three quarters of 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.

We expect the strong revenue growth and improvement in margins to continue through the December quarter. We have created an interactive analysis where we have summarized our full year expectations for Sina. You can change expected revenue, gross margin and income margin figures for Sina to gauge how it will impact expected EPS for the full year.

Key Growth Drivers

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  4. Sina’s Strength In Fintech Should Make Up For Weakness In Weibo Going Forward
  5. Sina Likely To Report Forgettable Q1 Results, But Revenues Should Recover Sharply In The Near Future
  6. How Much Can Chinese Stimulus Impact Sina’s Valuation?

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 three quarters combined 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.

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% through 2017 while non-GAAP operating income was up over 3x to $236 million. As a result, Sina’s reported non-GAAP net income and earnings per share for the three quarters combined were up 140% to $148 million and $1.97, respectively.

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 slowing down somewhat, which could potentially weigh on Weibo’s growth. This was a slight damper 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.

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