Sina (NASDAQ:SINA) reported its Q3 results on Wednesday, November 28, before market open. The company’s Q3 results saw a beat on EPS while missing slightly on revenue. While management’s stance appears to have turned cautious towards the macro environment, Sina’s lack of U.S. exposure may make the company’s guidance a bit conservative.
We maintain our price estimate of $86 per share for Sina, which is around 40% higher than the current market price. Our interactive dashboard on Sina’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation.
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- Sina Likely To Report Forgettable Q1 Results, But Revenues Should Recover Sharply In The Near Future
- How Much Can Chinese Stimulus Impact Sina’s Valuation?
Q3 Results Overview
Sina’s Q3 revenue grew 26% y-o-y to reach $557 million (vs. consensus expectation of $558 million, with advertising revenue up 33% primarily driven by 48% increase in Weibo advertising and marketing revenues. Non-advertising revenue declined 7% to $73.4 million due to a change in revenue reporting, forex headwinds and regulatory issues.
Gross margins again expanded by 400 bps (y-o-y) and came in at 80%, driven by a 500 bps increase in advertising gross margins. The company’s management attributed the increase in margins to the change in revenue reporting from a gross to net basis.
The bigger point was the company revising its revenue guidance for 2018 downward to between $2.09 billion and $2.12 billion from the earlier guidance of $2.23 billion to $2.38 billion. While this still represents an over 30% increase in revenue, management attributes shaving off 5-7% from the original revenue guidance to challenging macroeconomic conditions and regulatory factors.
We believe that expectations of a more challenging macro environment may be due to the current trade issues continuing for the last few months. Given the sheer magnitude of U.S.-China trade relations, the issues are unlikely to last for very long. Unless something fundamentally changes on the regulatory front, we believe that for a company growing at over 30%, Sina appears to be undervalued.
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