It has been about a month since the last earnings report for Sina (SINA). Shares have added about 0.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sina due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Ad Revenues Growth Aid SINA in Q1
SINA Corporation reported first-quarter 2019 non-GAAP earnings of 40 cents per share that missed the Zacks Consensus Estimate by 4 cents and declined 14.9% from the year-ago quarter.
Non-GAAP net revenues grew 8% year over year to $472.5 million. However, the figure missed the Zacks Consensus Estimate of $479 million.
The year-over-year increase was driven by growth in Weibo revenues and non-advertising revenues.
Advertising revenues (81.7% of total revenues) increased 5.7% year over year to $388 million, primarily driven by an increase of $38.2 million in Weibo advertising and marketing revenues. However, the decline in portal advertising revenues partially offset the increase.
Non-advertising revenues (18.3% of total revenues) increased 18.2% year over year to $87.1 million. The increase was primarily attributed to revenues generated from Weibo’s live broadcasting platform and higher revenues from SINA’s fin-tech businesses.
Revenues from Weibo business grew 14.1% year over year to $399.2 million.
Weibo’s VAS revenues increased 23.7% to $58 million and ad and marketing revenues grew 12.6% to $341.1 million in the reported quarter. Moreover, Weibo’s online advertising revenues increased 13% year over year to $341.1 million due to the FMCG sector, which adopted the company’s marketing tools. Weibo’s SME revenues increased 5% year over year.
However, softness in the gaming sector due to “macro challenges, regulations and competition in the ad inventory supply” hurt growth.
Portal revenues declined 10% year over year to $81.8 million. Portal advertising revenues declined 26.9% year over year to $46.9 million. Decline in Small Medium Enterprise (SME) customers’ ad budget negatively impacted growth.
Portal non-ad revenue revenues increased 34% to $32.3 million. This increase was driven by growth in micro loan facilitation business.
SINA reported gross profit of $359.6 million, up 8.3% year over year. Gross margin of 75.7% expanded 40 basis points (bps) from the year-ago quarter. This increase was driven by a 100 bps increase in advertising platform gross margin.
Operating expenses (57.4% of total revenues) were $272.7 million, up 5.4% year over year. Sales and marketing expenses were $145.5 million, up 4.1% year over year. Product development expense was $94.1 million, reflecting an increase of 10.5%. However, general and administrative expenses fell 2.3% to $33.2 million.
Operating income in the reported quarter was $86.9 million, up 18.6% year over year.
Balance Sheet and Cash Flow
SINA exited the quarter with cash, cash equivalents and short-term investments of $2.1 billion compared with $2.3 billion in the fourth-quarter of 2018.
Cash provided by operating activities in the quarter was $93.5 million compared with $138.9 million in the prior quarter. Capital expenditure was $10 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -75% due to these changes.
Currently, Sina has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Sina has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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