SINA Corp. (SINA) is scheduled to announce its fiscal first quarter 2012 results after market closes on Tuesday, May 15, 2012. In the run up to the earnings release, we do not notice any significant changes in the analyst estimates for the quarter. However, we note that SINA has failed to outperform the Zacks Consensus Estimates on three occasions out of the last four quarters.
Prior Quarter Highlights
SINA’s fourth-quarter bottom line not only missed the Zacks Consensus Estimate but plummeted 68.7% on a year-over-year basis primarily due to margin contractions. However, the top line increased 22.5% from the comparable prior-year quarter, primarily driven by higher advertising revenue.
For further details please read: SINA Misses Estimates in 4Q
Current Quarter Expectations
Though SINA did not provide any earnings estimate, the Zacks Consensus Estimate projects a loss of 27 cents per share for the first quarter. SINA expects non-GAAP net revenue to be between $101.0 million and $104.0 million for the first quarter of 2012. The Zacks Consensus Revenue Estimate is pegged at $107.0 million.
Moreover, the company expects non-GAAP advertising revenue in the range of $78.0 million to $80.0 million, while non-GAAP non-advertising revenue is projected in the range of $23.0 million to $24.0 million.
Estimates Trend Revision
Over the past 30 days, out of the seven analysts covering the stock, only one analyst revised the quarterly estimates downward and no upward revision was witnessed. The Zacks Consensus Estimate for the first quarter of 2012 worsened from a loss of 25 cents to 29 cents per share.
Analysts covering the stock believe that weaker-than-expected advertising revenues in the first quarter will hurt the top line of the company. Moreover, SINA has been under pressure from the Chinese government to impose restrictions on user content.
Of course, Weibo’s growing popularity in the micro-blog market is a positive catalyst for the company. In 2011, the micro-blog market expanded 296% year over year and accumulated 250 million users. Incidentally, Weibo has 140 million active users.
We believe that SINA remains a premier company owing to its strong product pipeline, continuous investment in product development and marketing and a robust user base for its E-Commerce and Weibo offerings.
However, earnings growth may disappoint in the forthcoming quarters due to higher operating costs related to its social networking platform, Weibo. We believe that any weakness in advertising revenue will impact SINA’s ability to counter increasing operating expenses, which in turn will hurt its bottom line going forward.
We believe that increasing competition in the domestic market from Baidu Inc. (BIDU), Sohu.com Inc. (SOHU), Tencent and Alibaba will remain the primary headwinds over the long term. Further, we believe that the increasing regulations from the Chinese Government remain the primary concern going forward.
We remain Neutral over the long term (6-12 months). Currently, SINA has a Zacks #3 Rank, which implies a Hold rating in the near term.
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