Sina’s Strength In Fintech Should Make Up For Weakness In Weibo Going Forward

Sina (NASDAQ:SINA) reported its Q1 results late last week. The company’s advertising revenue came in below consensus expectations on the back of weakness in Weibo. Notably, Sina’s management expects a downward revision in Weibo to directly impact Sina’s financials in the near term. While the company’s advertising revenue met our Q1 expectations of $388 million, the non-advertising revenues were better than what we expected. Because of this, we are sticking to our price estimate of $73 per share for Sina despite management commentary on weak macroeconomic conditions compounded by the ongoing U.S.-China tariff war.

Our price estimate is roughly 80% 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 Price 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 more Trefis technology company data here.

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 was driven by Weibo (whose revenues increased 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.

Q1 performance and full-year outlook

• Display Advertising: Revenue grew to $388 million (+6% y-o-y), due to weakness in Weibo. We expect these revenues to be $2.06 billion for full-year 2019.
• Others: Revenue grew to $87 million (+18% y-o-y), driven by revenues from Weibo’s live streaming business (acquired in Q4 of 2018) and strength in the fintech businesses. We expect these revenues to be $364 million for full-year 2019

We forecast Sina’s EPS figure for full-year 2019 to be $6.41. Taken together with our forward P/E multiple of 11x for the company, this works out to a $73 per share price estimate for the company’s stock, which is around 80% 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.