Did Weibo Put Sina Back on the Map?

With shares of Sina Corporation (NASDAQ:SINA) trading at around $56.42, is SINA an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Sina was once top dog in the Internet Software & Services industry in China. That was until the competition became fierce. However, Sina now has Weibo, which is pretty much the Chinese version of Twitter.

At the end of 2012, Weibo had 503 million registered users. Since that’s a difficult number to comprehend, think of it this way – that’s 200 million more people than the entire United States population! Needless to say, there will be many monetization opportunities via Weibo.

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Weibo’s traffic has steadily increased over the past three months. However, it’s not dominating as much as it has in the past. Over the past three months, pageviews-per-user has declined 5.60 percent, time on-site has declined 4 percent, and the bounce rate has increased 2 percent. Never fear, though, Alibaba Group Holding Ltd. recently agreed to buy an 18 percent stake for $586 million. This will help advertising sales.

As far as Sina itself goes, traffic has been relatively stagnant over the past three months. Also over the past three months, pageviews-per-user has declined 3.46 percent, time-on-site has declined 1 percent, and the bounce rate has increased 3 percent. These aren’t worrisome numbers; they’re just not inspiring.

Sina has consistently improved revenues on an annual basis, and it showed a profit in 2012 after two years of losses. Sales are also expected to increase 18 percent this year. As far as analysts go, they like the stock: 17 Buy, 5 Hold, 3 Sell.

There are three big concerns for Sina. One is increased competition that will not back down. Two is poor valuation (trading at 121 times earnings). Three is that the stock will not be resilient in weak markets.

Now let’s take a look at some comparative numbers. The chart below compares fundamentals for Sina, Sohu.com Inc. (NASDAQ:SOHU), and Baidu (NASDAQ:BIDU). Sina has a market cap of $3.77 billion, Sohu has a market cap of $2.05 billion, and Baidu has a market cap of $31.23 billion.

SINA

SOHU

BIDU

Trailing   P/E

121.07

25.55

18.47

Forward   P/E

32.06

15.60

14.29

Profit   Margin

6.00%

7.71

44.21%

ROE

2.89%

14.13

44.08%

Operating   Cash Flow

  $32.61   Million

 N/A

 N/A

Dividend   Yield

N/A

N/A

N/A

Short   Position

N/A

8.20%

N/A

 

Let’s take a look at some more important numbers prior to forming an opinion on this stock.

E = Equity to Debt Ratio Is Strong         

The debt-to-equity ratio for Sina is stronger than the industry average of 0.10. None of these companies have debt concerns, but Sina is at the top of the class in this area.

Debt-To-Equity

Cash

Long-Term Debt

SINA

0.00

$713.60 Million

$0

SOHU

0.19

$951.67 Million

$270.50 Million

BIDU

0.40

$5.39 Billion

$1.90 Billion

 

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T = Technicals Are Strong  

The numbers below can be deceiving. The last two years as a whole have been difficult for Sina. The past year also hasn’t been impressive. The real strength has been over the past month, but can it continue?

1 Month

Year-To-Date

1 Year

3 Year

SINA

18.52%

12.29%

-0.90%

70.88%

SOHU

14.43%

13.71%

14.05%

18.80%

BIDU

6.83%

-10.96%

-31.32%

33.68%

 

At $56.42, Sina is trading above all its averages.

50-Day   SMA

49.95

100-Day   SMA

51.30

200-Day   SMA

53.01

 

E = Earnings Have Been Inconsistent                               

Earnings have been inconsistent, but once again, Sina did show a profit in 2012. Revenue has steadily increased for three years.

2008

2009

2010

2011

2012

Revenue   ($)in   millions

369.59

358.57

402.62

482.83

529.33

Diluted   EPS ($)

1.33

6.95

-0.31

-4.64

0.47

 

When we look at the previous quarter on a year-over-year basis, we see an increase in revenue and a decline in earnings. Both revenue and earnings declined on a sequential basis.

 12/2011

3/2012

6/2012

9/2012

12/2012

Revenue   ($)in   millions

133.37

106.22

131.60

152.38

139.13

Diluted   EPS ($)

0.14

-0.21

0.49

0.14

0.04

 

Now let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Might Support the Industry

This simply comes down to the Chinese economy. Is it slowing down? Is it rebounding? The reports seem to change every day.

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Conclusion

Weibo has put Sina back on the map. As long as Sina doesn’t make a critical error, Weibo should remain incredibly valuable. However, due to poor valuation and a questionable Chinese economy, Sina is a neutral WAIT AND SEE.

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Disclosure: All content posted represents my opinion and views and should never be considered professional advice. You should do your own research and consult with a professional financial advisor before making any investment decisions. I do not have a position in this stock. I am currently short technology, financials, the Russell 2000, and the euro.