It has been about a month since the last earnings report for Sina (SINA - Free Report) . Shares have lost about 11.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Sina due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts. <p style="text-align: justify;">SINA Corporation 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.<br /><br />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.<br /><br /><strong>Quarter Details</strong><br /><br />The increase in advertising revenues was driven by growth in Weibo segment’s advertising and marketing revenues.<br /><br />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.<br /><br />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.<br /><br />Portal advertising revenues were up 8% year over year to $84.2 million driven by increased monetization of the mobile segment.<br /><br />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.<br /><br />Daily Active Users for News app and Finance app increased approximately 25% and 144%, respectively.<br /> <br />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.<br /><br /><strong>Operating Details</strong><br /><br />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.<br /><br />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.<br /><br />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%.<br /><br />Reported operating income was $136.2 million, rising 43.8% year over year.<br /><br /><strong>Balance Sheet and Cash Flow</strong><br /><br />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.<br /><br />Cash provided by operating activities in the quarter was $16.4 million. Capital expenditure was $162.1 million.<br /><br />In the reported quarter, the company repurchased 3.4 million shares for $302.6 million.<br /><br />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.<br /> </p>
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -48.75% due to these changes.
At this time, Sina has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Sina has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.