What To Watch Out For In Sina’s Q3

Sina (NASDAQ:SINA) reports Q3 on November 28, before market open. Despite the company’s strong growth, the stock has been facing headwinds due to the potential impact from the U.S.-China trade issues. Unless management points towards incremental deterioration of the local business sentiment, Sina’s lack of significant U.S. exposure could actually make the stock significantly undervalued.

We currently have a 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.

In Q2, Sina saw strong growth, with revenue up over 50% y-o-y to reach $537 million. While advertising revenue was up 54%, non-advertising revenue was up 31%. Q2 gross margins expanded 600 bps to reach 80%. The company’s management also noted that Weibo saw continued strong growth in its user base and monetization, and overall Sina mobile apps continued to see solid user growth. The company’s board also approved a new share repurchase program, with total authorization of $500 million of shares to be repurchased by December 2019.

While the market’s reaction to the stock has largely been predicated on the prevalent sentiment around U.S.-China trade disputes, Sina does not have much U.S. exposure. During its Q2 earnings call, however, management did mention a challenging business environment. While some of this is related to competitive pressure, the commentary could also indicate an expectation of an impending domestic slowdown on the back of the trade war.

In the company’s Q3 results, we will be listening keenly for any color on the nature of the business slowdown (if any) and management’s outlook on business sentiment related to the tariffs. Unless management points towards exacerbation of weakening sentiment, investor concerns may be substantially overblown. Accordingly, Sina’s stock looks undervalued at the moment.

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