Sina Likely To Report Forgettable Q1 Results, But Revenues Should Recover Sharply In The Near Future

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Sina (NASDAQ:SINA) reports its Q1 results on May 23. While Chinese technology company expected its revenues to grow around 18-25% in 2019 at the beginning of the year, the renewed U.S.-China tariff war should negatively impact Sina’s top line in the near future. We expect the company’s Q1 results to be weak, but also believe that its growth weakness will bottom out over subsequent quarters –  paving the way for the company to report a growth rate which is closer to the lower end of its guidance.

We maintain our price estimate of $73 per share for Sina, which is now around 55% higher than the current market price. A sizable chunk of this price difference can be attributed to the sell-off in Sina’s shares over recent weeks as the trade war between the two largest global economies intensifies. However, we believe that investor concerns are overblown. Our interactive dashboard on Sina’s Q1 Earnings Estimate outlines our forecasts and estimates for the company for the rest of the year. You can modify any of the key drivers to visualize the impact of changes on its valuation. Also, you can see all of our technology company data here.

Relevant Articles
  1. Why Sina’s Revenues Will Likely See Only A Marginal Growth in 2020
  2. Decline In Sina’s Q3 Advertising Revenue Isn’t A Cause For Concern Yet
  3. Can Sina’s Revenue Growth Numbers Recover This Year?
  4. Sina’s Strength In Fintech Should Make Up For Weakness In Weibo Going Forward
  5. How Much Can Chinese Stimulus Impact Sina’s Valuation?
  6. How Did Sina Perform In Q4?

A Quick Look At Sina’s Revenue Sources

Sina makes money through advertising on its mobile and web properties, and through its fintech offerings and mobile value-added services. Most of the company’s revenue is generated in China. Sina’s fiscal year ends in December.

The company has two business segments (total revenue of $2.1 billion in 2018)

  • Display Advertising (revenue of $1.8 billion in 2018, 85% of total revenue): Segment revenue is derived from mobile and web advertising. Weibo, a microblogging site (also called the Twitter of China), has been the major contributor of the company’s growth.
  • Others (revenue of $319 million in 2019, 15% of total revenue): Segment revenue is derived from online payments and loan facilitation services.

Sina’s total revenues grew by $1.1 billion over 2016-2018 (CAGR of 43%)

  • Revenue growth had been driven by Weibo (with revenues increasing from $652 million in 2016 to $1.7 billion in 2018) due to an increase in digital advertising spends. Alibaba remains a major customer for Sina, with its contribution to revenues increasing from $58 million in 2016 to $118 million in 2018.
  • The company has seen some weakness in Other revenues due to government regulation in the peer-to-peer lending industry.

Q4 performance and Q1 expectations:

  • Display Advertising: In Q4, revenues grew to $484 million (+14% y-o-y). Taking into account seasonal trends, we expect revenues to be $388 million in Q1 2019 (+6% y-o-y)
  • Others: In Q4 revenue, Other revenues were $89 million (+12 y-o-y). We expect these revenue to be $77 million for the latest quarter (+5% y-o-y)

We forecast Sina’s EPS figure for full-year 2019 to be $6.18. Taken together with our forward P/E multiple of 12x for the company, this works out to a $73 per share price estimate for the company’s stock, which is around 55% higher than the current market price.

Do not agree with our forecast? Create your own price forecast for Sina by changing the base inputs (blue dots) on our interactive dashboard.

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