Weibo Is Expected to Drive Growth for SINA Corp (SINA), Analyst Comments on What’s AheadBy Carrie Williams
After reporting strong 3Q16 results, with both earnings and revenue beat yesterday evening, the company’s shares opened today at $70.67, up 5% from yesterday’s close of $67.29. SINA had reported Q3 EPS of $0.56 which beat estimates by $0.21, as well as $272.3 million (+21.7% YoY) revenue which was better than the estimates by $7 million.
The social media business line of SINA, Weibo displayed a robust growth, thanks to continued user growth as well as accelerated monetization from KA. The Olympic event, as well as richer multi-media offerings, were the main drivers for Weibo’s higher user growth. Jiang believes that Weibo would be a key beneficiary of China’s online advertising market, especially in mobile, social and video.
Weibo ad revenue had grown 48% YoY to $156.7 million, while its VAS revenue grew 7% YoY to $20.2 million. This was mainly driven by membership revenue (96% YoY) in spite of a continued decline of game (-26% YoY). For 4Q16, Weibo is expected to help the overall margin expansion for SINA by providing continued operating leverage. The company had announced a revenue guidance of $205-$210 million for microblogging service Weibo, which is higher than the consensus expectation of $197mm.
The negatives like soft macroeconomic conditions in China, increasing competition from WeChat and Sohu, as well as the strict restraints imposed on social media activities and online search, is expected to be offset by the monetization ability of Weibo. SINA is currently investing in product development and marketing and also has a strong product pipeline.
SINA Corp has an analyst consensus rating of a Strong Buy with an average analyst price target of $106, according to TipRanks. The PT is an upside of 42.19% from the current levels.