Sina New Coverage: $50 Trefis Price Estimate

Sina (NASDAQ:SINA) is an online media company also offering mobile value added services in China. The company mainly online news and content through SINA.com, a microblog Weibo.com that is kind of like Twitter and SINA Mobile Value Added Services (MVAS). Sina makes money primarily through its display advertising and mobile value added services. The company faces competition in its different verticals from Internet giants such as Baidu (NYSE:BIDU), Tencent and Sohu (NASDAQ:SOHU) and other companies. While these stocks are not well known by many investors, they are sizable companies with interesting growth dynamics given low Internet penetration in China. Baidu is around a $50 billion market cap company and Tencent is a $290 billion market cap while Sina’s market cap is more modest at about $5 billion.

As part of our expanding international coverage, we launch coverage of Sina with a $50 Trefis price estimate. This implies around 30% downside from the current market price.

See the full Trefis analysis for Sina

Sina at a Glance

Sina has employed a strategy targeting both short-term revenue opportunities such as banner advertising campaigns as well as longer-term high value contracts that include integrated marketing packages. SINA’s MVAS offerings allow users to receive news and information, download ring tones, mobile games and pictures, which is a lucrative business. However this business is also highly scrutinized and closely watched by telecom operator policies and government regulations. While a burden for Sina to make sure it’s complying with government regulations, these rules are also a blessing in disguise as the Internet and microblogging have become wildly popular as a medium of “on the ground” information generated by real people and celebrities that is not run by the government owned papers or new agencies.

The advertising market in China is relatively new and growing. As most advertisers have limited experience with the Internet as an advertising medium, adoption has varied among foreign customers. Major multi-national corporations actually account for a large share of this business given these companies’ experiences building brands abroad.

However Baidu in particular is helping increase the adoption of small and medium sized businesses to advertise online, and this will be a long term trend to watch. In the near term, large advertisers are the keys to revenue growth in advertising.

Need New Offerings to Offset Declining Market Share

There is increasing competition which is putting some pressure on online advertising prices and limiting web page space. The company has diversified its products offerings facing competition in all of its major business verticals.

Many of these competitors have greater financial resources and better brand recognition in their respective areas. Smaller companies may be even willing to compete for market share at the expense of significant operating losses. The company also faces competition from traditional media companies like newspapers, but to a lesser extent. Even though China’s online display advertising market is growing steadily, the company is seeing declining market share given intense competition especially among the larger websites. The one mitigating factor is that its Weibo service has attracted a significant following and this could present an avenue for market share growth as could other initiatives to tap the growing global internet population.

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