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SINA Drops After Another Solid Quarter

Steve Symington, The Motley Fool

SINA Corp. (NASDAQ: SINA) announced better-than-expected second-quarter 2018 results early Wednesday, including broad-based strength both across its core business and from its Weibo microblogging platform. Still -- similar to last quarter's seemingly unjustified decline -- shares are down around 6% today as of this writing.

Let's dig deeper, then, to get a better idea of how the Chinese online media company ended the first half, and what investors should expect for the rest of the year.

SINA black and red logo

IMAGE SOURCE: SINA CORP.

SINA's results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Growth

GAAP net revenue

$537.4 million

$358.9 million

49.7%

GAAP net income attributable to SINA

$35.1 million

$23.4 million

50%

GAAP net income per diluted share

$0.47

$0.31

51.6%

DATA SOURCE: SINA CORPORATION. 

What happened this quarter?

  • On an adjusted (non-GAAP) basis -- which excludes items like stock-based compensation -- SINA's net income was $66.5 million, or $0.89 per share, up from $0.70 per share in the same year-ago period.
  • Though we don't usually pay close attention to Wall Street's demands, these results compared favorably to consensus estimates for adjusted earnings of $0.69 per share on revenue of $535.3 million.
  • Advertising revenue climbed 54% year over year to $454.1 million, largely driven by a 69% increase in Weibo ad and marketing revenue.
  • Non-advertising revenue climbed 31% to $83.3 million, driven by higher Weibo membership fees, live broadcasting, and SINA's fin-tech businesses.
  • The company generated cash from operations of $16.4 million.
  • Upon the June 30, 2018, expiration of its previous $500 million repurchase program authorized in February 2016 -- under which SINA bought back 3.4 million shares for $302.6 million -- SINA's board approved a new $500 million repurchase plan good through December 2019.

What management had to say

SINA chairman and CEO Charles Chao stated:

We had another good quarter. Weibo continued to record healthy growth in both user base and monetization despite more intensified competition. For SINA businesses, we continued to see robust growth in user scale of SINA mobile apps, which bodes well for improved mobile monetization of SINA media.

During the subsequent conference call, management noted that both SINA and Weibo have faced challenges driving advertising growth within the small and medium enterprise (SME) market segment, as well as headwinds from unfavorable foreign exchange rates. Further, he added that the second half may be more challenging despite some improvements on the SME end, and given harder year-to-year comparisons on exchange rates.

Looking forward

Still, Chao noted that SINA's full-year revenue should fall within the guidance range they provided in February, which called for between 14.5 billion renminbi and 15.5 billion renminbi (or $2.12 billion to $2.27 billion at current exchange rates). However, consensus estimates had predicted SINA's full-year sales would be closer to the high end of that dollar range -- perhaps an unsurprising disparity considering SINA's relative outperformance in the first half.

In the end, though, there was nothing in this report that should have dissuaded bullish investors from owning the stock. And I think long-term shareholders should still be content with where SINA stands.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Sina. The Motley Fool has a disclosure policy.