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SINA Corp (SINA - Analyst Report) reported third-quarter profit of 35 cents per share (including stock-based compensation), exceeding the Zacks Consensus Estimate of 17 cents cent per share.


Revenues jumped 21.2% year over year to $184.6 million and were much better than management’s guided range of $176.0 million to $180.0 million. Revenues also beat the Zacks Consensus Estimate of $181.0 million.

The year-over-year growth in revenues was primarily driven by higher revenues from online advertising and fee-based services. Advertising revenues moved up 25.7% from the year-ago quarter to $151.6 million. Advertising revenues were within management’s guided range of $151.0 million–$153.0 million.

Non-advertising revenues increased 4.7% year over year to $28.4 million in the quarter, ahead of management’s guided range of $25.0 million–$27.0 million. Mobile value-added services (MVAS) revenues were $13.5 million, down 29.5% from the year-ago quarter.

Operating Results

Gross margin increased 950 basis points (bps) from the year-ago quarter to 64.0% due to higher revenue base and increase in gross margin of the advertising and non-advertising business.

Operating expenses increased 19.6% from the year-ago quarter. The sharp rise was primarily driven by higher product development cost (up 28.8%) and general & administrative expense (up 15.9%).

Operating income was $18.8 million, recovering from a loss of $2.5 million in the year-ago quarter. The recovery was primarily due to increase in revenues and gross margin expansion. Net income improved to $23.8 million or 35 cents per share in the quarter from $5.4 million or 8 cents in the year-ago quarter.

Balance Sheet

SINA exited the third quarter with cash, cash equivalents and short-term investments of $1.22 billion compared with $1.24 billion at the end of the second quarter. Cash provided by operating activities for the third quarter was $12.3 million.


SINA expects revenues for the fourth quarter of 2013 to be in the range of $190 million and $194 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.


SINA reported solid third quarter results, with both earnings and revenues exceeding the Zacks Consensus Estimate. We believe that SINA remains a premier company based on its strong product pipeline, continuous investments in product development and marketing and a robust user base for its e-commerce and Weibo offerings. In this regard, the partnership with Alibaba Group is expected to boost SINA’s position in the Chinese e-commerce market.

However, increasing competition from Inc. (SOHU - Analyst Report), Yahoo (YHOO - Analyst Report), NetEase (NTES - Snapshot Report) and Tencent will hurt profitability over the long term. Further, we believe that increasing regulations imposed by the Chinese government may put some pressure on the stock.

Currently, SINA has a Zacks Rank #2 (Buy).

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