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SINA Q2 Earnings Beat, Advertising Revenue Growth Solid

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SINA Corporation (SINA - Free Report) reported second-quarter 2018 non-GAAP earnings of 89 cents per share, which beat the Zacks Consensus Estimate of 71 cents and increased 27.1% from the year-ago quarter.

Non-GAAP net revenues grew 50.1% to $534.8 million. Advertising revenues (84.5% of total revenues) surged 53.8% year over year to $454.1 million.

Quarter Details

The increase in advertising revenues was driven by growth in Weibo segment’s advertising and marketing revenues.

Non-advertising (non-GAAP) revenues increased 31.9% year over year to $80.7 million driven by increased revenues from SINA fin-tech business and live broadcasting business as well as increased Weibo membership fees.

Revenues from Weibo business grew 68.4% year over year to $426.6 million, primarily driven by growth in user base and monetization. Non-ad revenues grew 61.7% to $56.6 million and ad and marketing revenues grew 69.4% to $369.9 million in the reported quarter.

Portal advertising revenues were up 8% year over year to $84.2 million driven by increased monetization of the mobile segment.

Mobile app revenues accounted for 82% of total portal ad revenues compared with 57% in the year-ago quarter. The upside can be attributed to growth in mobile traffic for SINA News and Finance applications.

Daily Active Users for News app and Finance app increased approximately 25% and 144%, respectively.
 
Portal non-advertising revenues increased 6.6% to $30.6 million driven by growth in the micro loan business. However, for the coming two quarters, stricter regulations in the micro-lending sector continue to remain an overhang.

Sina Corporation Price, Consensus and EPS Surprise

Sina Corporation Price, Consensus and EPS Surprise | Sina Corporation Quote

Operating Details

SINA’s reported gross profit was $430.9 million, which surged 61.6% year over year. Gross margin of 80.2% expanded 590 basis points (bps) from the year-ago quarter.

Operating expenses (54.8% of total revenues) were $294.7 million, up 71.4% year over year due to increased user acquisition cost and marketing expense.

Sales and marketing expenses (62.3% of operating cost) were $183.6 million, up 120.1% year over year driven by the company’s user expansion cost. Product development (28.5%) was $83.9 million, reflecting an increase of 32.1%.

Reported operating income was $136.2 million, rising 43.8% year over year.

Balance Sheet and Cash Flow

SINA exited the quarter with cash & cash equivalents (including short-term investments & restricted cash) of $2.8 billion compared with $3.64 billion as of Mar 31, 2018. The lower cash balance can be attributed to increasing investments and share repurchase programs by the company.

Cash provided by operating activities in the quarter was $16.4 million. Capital expenditure was $162.1 million.

In the reported quarter, the company repurchased 3.4 million shares for $302.6 million.

However, we believe SINA’s top and bottom line will be adversely impacted by the significant fall in RMB against the U.S. dollar since June 2018.

Zacks Rank & Stocks to Consider

SINA currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Vishay Intertechnology (VSH - Free Report) , Science Applications International (SAIC - Free Report) and Seagate Technology (STX - Free Report) . While Vishay Intertechnology sports a Zacks Rank #1 (Strong Buy), SAIC and Seagate Technology carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Vishay, SAIC and Seagate is projected to be 8%, 5% and 13.3%, respectively.

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