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Bear of the Day: SINA (SINA)

Tracey Ryniec

SINA Corporation (SINA) is facing a slowing Chinese economy. This Zacks Rank #5 (Strong Sell) is expected to grow revenue in the single digits in 2019.

SINA is a Chinese online media company. It operates a digital media network under SINA.com, SINA mobile including the app and Weibo, which is a Chinese online social media site akin to Twitter.

Second Miss in a Row in Q1

On May 23, SINA reported its first quarter results and missed on the Zacks Consensus Estimate for the second quarter in a row.

Earnings were $0.40 versus the consensus of $0.44.

Revenue rose 8% to $472.5 million from $438.1 million a year ago.

Advertising revenue rose just 6% to $388 million, driven by 13% growth in Weibo advertising and marketing revenue but which was partially offset by a decrease in portal advertising revenue.

Gross margin remained elevated at 76%, compared with 75% in the year ago quarter.

SINA still has a lot of cash on hand, with cash, cash equivalents and short-term investments totaling $2.1 billion as of the end of March 31, 2019. But that was down from $2.3 billion at the end of Dec 2018.

The decline was the result of continued investment activities.

Analysts Cut Estimates

Analysts didn't like what they saw in the report with revenue now rising only in the single-digits.

3 estimates were cut for 2019 since the results which pushed the Zacks Consensus Estimate down to $2.91 from $3.66 just 90 days ago.

That's an earnings decline of 5.2% in 2019 as the company made $3.07 in 2018.

Analysts are also bearish on 2020 as 2 estimates were cut for next year after the results.

The 2020 Zacks Consensus Estimate dropped to $3.45 from $4.76 over the last 3 months. That's still earnings growth of 18.6%, however.

Shares Plunge: Is it a Buying Opportunity?

Shares of SINA have sunk in 2019, falling 21.3% year-to-date. Over the last year, they're down 50.5%.

If you thought you could buy Weibo (WB) instead, those shares are also down 26.4% year-to-date. Weibo is a Zacks Rank #4 (Sell).

If you're interested in investing in a social media company, you may want to consider Twitter (TWTR). Those shares are up 23.8% year-to-date and it's a Zacks Rank #2 (Buy) stock.

It's more expensive, however. SINA is trading at just 14.6x forward earnings while Twitter is trading at 33x.

But with sinking earnings, SINA is looking like a value trap, instead of a buying opportunity. Investors should keep an eye on changes to the earnings estimates.

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