SINA Corporation (SINA - Free Report) is expected to report third-quarter 2016 results on Nov 16. Last quarter, it posted a positive earnings surprise of 700.00%. The company posted an average positive surprise of 188.35% over the trailing four quarters.
Let’s see how things are shaping up for this announcement.
Factors at Play
SINA has a strong product pipeline and is investing in product development and marketing. The company’s robust user base for its e-Commerce and Weibo offerings are the positives. In August this year, SINA announced that it will be distributing its Weibo stock to its shareholders on a pro rata basis. SINA has a majority stake (54% or 78% by voting power) in Weibo, which is a microblogging service available in China. Share distribution will reduce SINA’s stake in Weibo to 51% or 75% by voting power. SINA will be giving away one Weibo Class A ordinary share to shareholders holding 10 shares of SINA. The move is widely observed as a way to tackle overvaluation of Weibo shares and closing the valuation gap for SINA shareholders.
However, the company’s business is likely to be impacted by soft macroeconomic conditions in China. Also, significant restrictions on online search and other social-networking activities in the region remain concerns.
Moreover, Weibo is expected to face stiff competition from the likes of WeChat in China, which may hurt its user base. We believe that Weibo’s monetization ability will be a major driving factor for SINA amid intensifying competition from the likes of Sohu.com Inc. (SOHU - Free Report) and NetEase (NTES - Free Report) in the video and brand advertising market.
Our proven model does not conclusively show that SINA is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: SINA has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 19 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: SINA has a Zacks Rank #1.Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stock to Consider
Here’s a stock that you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter
EVINE Live Inc. (EVLV - Free Report) with an Earnings ESP of +25.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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