SINA Corp's (SINA) Q3 Earnings And Revenues Increase Y/Y

SINA Corp. (NASDAQ:SINA) reported third-quarter 2016 non GAAP earnings of 56 cents per share, up 43.6% year over year. Net revenue of $274.9 million topped the consensus mark of $255.3 million and increased 21.5% year over year.

Following the strong results, shares were up nearly 2.5% in the after-hours trading session yesterday. SINA along with a consortium of buyers acquired E-House, a prominent Chinese real estate services company on Aug 12, 2016. SINA holds 43% of shares in E-House.

Quarter Details

Advertising revenues moved up 21% year over year to $233.6 million. The upside was primarily driven by strength in advertising related to Weibo (WB), though it was offset partially by weakness in portal advertising revenues. Non-advertising revenues rose 25.6% year over year to $41.2 million.

Weibo (NASDAQ:WB) revenues surged 41.8% year over year to $176.9 million. Monthly active users went up 34% year over year to 297 million. Daily active users were 132 million at quarter-end, up 32%. The strong growth momentum of Weibo advertising was driven by increasing adoption of mobile devices (89% of MAUs were mobile users) and improved monetization.

Portal revenues were almost flat year over year at $100.9 million. Portal Advertising revenues decreased over 8.8% in the quarter to $79.9 million.

Non-GAAP operating margin was 21% compared with 13% reported in the prior-year quarter.

Balance Sheet and Cash Flow

SINA exited the quarter with cash, cash equivalents and short-term investments of $2.21 billion, unchanged from Dec 31, 2015.

Cash provided by operating activities in the quarter was $256.1 million. Capex stood at $2.3 million.

Our Take

SINA has a strong product pipeline and is investing in product development and marketing. The company’s robust user base for its e-Commerce and Weibo offerings are positives. In August this year, SINA announced that it will be distributing its Weibo stock to its shareholders on a pro rata basis. SINA has a majority stake (54% or 78% by voting power) in Weibo, which is a microblogging service available in China. Share distribution will reduce SINA’s stake in Weibo to 50% or 75% by voting power. SINA will be giving away one Weibo Class A ordinary share to shareholders holding 10 shares of SINA. The move is widely observed as a way to tackle overvaluation of Weibo shares and closing the valuation gap for SINA shareholders.

However, the company’s business is likely to be impacted by soft macroeconomic conditions in China. Also, significant restrictions on online search and other social-networking activities in the region remain concerns.

Moreover, Weibo is expected to face stiff competition from the likes of WeChat in China, which may hurt its user base. We believe that Weibo’s monetization ability will be a major driving factor for SINA amid intensifying competition from the likes of Sohu.com Inc. (NASDAQ:SOHU) and NetEase (NASDAQ:NTES) in the video and brand advertising market.

Currently, SINA has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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