SINA (SINA) is one of the largest online media portals in China, providing users with a broad selection of information, communications and entertainment choices, while providing advertisers and content holders with a massive audience to target with online advertising.
This week the company reported strong 3Q13 results above expectations, and provided robust 4Q13 revenue guidance fueled by Weibo, their hugely successful "microblogging" site that is often compared to a hybrid of Twitter (TWTR) and Facebook (FB).
SINA reported third quarter earnings of 35 cents per share that were well ahead of the Zacks Consensus Estimate of 17 cents and the year-ago figure of 8 cents. SINA’s partnership with the Alibaba group contributed significantly to the company’s overall results.
Weibo Leads the Way
Weibo total revenue was $53.4 million in the quarter, 30% of SINA's $179.9 million revenue and more than double Weibo revenue of $23.6 million in 3Q12. Weibo ad revenue was $43.7m, up 119% YoY and 46% QoQ.
Weibo’s daily active user (DAU) base increased 11.2% to 60.2 million from the month of June to September. This was much better than 8.2% growth reported during the March-June period.
SINA expects revenues for the fourth quarter of 2013 to be in the range of $190.0 million and $194.0 million. Advertising revenues are expected in the range of $160.0 million–$162.0 million, while non-advertising revenues are projected in the range of $30.0 million–$32.0 million.
The Zacks Consensus Estimate for fiscal 2013 increased 33.3% to 8 cents per share as most of the estimates were revised higher over the last 60 days. For fiscal 2014, the Zacks Consensus Estimate increased 19.3% to $1.42 per share.
Revenue and Margin Drivers
There was a time not too long ago when investors questioned the worth of Weibo to the company's web strategy. Now, among the key investment drivers is clearly accelerating year-over-year revenue growth as Weibo’s revenue momentum and weighting increases.
And as Weibo moves from adjusted EBITDA losses to profits, margin expansion is clearly evident. SINA adjusted EBITDA of $36.3 million reflects a 20.2% margin compared to 10.8% in 3Q12 and a recent trough of 4.2% in 1Q13.
Finally, now that Twitter has just launched its own successful IPO, the value proposition for the Weibo franchise has been elevated. And since the Chinese are focused on having their own Internet players win instead of Google, Facebook, or Twitter, focusing on the current winners like Baidu (BIDU), Qihoo 360 (QIHU), and SINA is the way to go.
Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.