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SINA Declares New $500 Million Share Repurchase Program

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SINA’s SINA board of directors recently authorized a share repurchase program. Also called the 2020 New Program, it allows the company to repurchase up to $500 million of its American depositary shares (ADS) over the next 12 months.

The new program comes after the expiry of the 2019 Program, which was announced in 2018 and authorized the company to repurchase its own ADS with an aggregate value of up to $500 million up to the end of December 2019.

As of Dec 31, 2019, the company repurchased approximately 2.2 million shares for approximately $82.1 million under the 2019 Program.

The shares may be repurchased on the open market at prevailing market prices or in negotiated transactions off the market and are expected to be funded from the company’s existing cash balance.

Notably, as of Sep 30, 2019, SINA's cash, cash equivalents and short-term investments were $2.9 billion, compared with $2.15 billion reported in the previous quarter.

The new buyback program is expected to aid the company’s bottom-line in the upcoming quarters. This has been the primary reason behind acceleration in SINA’s stock price since the announcement. The company’s stock price closed at $43.36 on Jan 2, 2020, up 8.6% from Dec 31.

Headwinds Hurt Profitability

SINA’s performance has been hurt by various factors.

Notably, the company is battling softness in the gaming sector due to stringent regulations and stiff competition.

SINA’s social media platform Weibo has also faced significant scrutiny. The Chinese government has ordered a shutdown of audio and video streaming on Weibo’s platform as it didn’t meet the government’s stringent regulations.

Advertising budget cuts by small and medium enterprise customers and stiff competition in the online advertising market in China have also hurt SINA’s performance.

Moreover, the company’s continued investments in Weibo and other verticals like Internet finance, insurance, automobile and sports will hurt profitability, going forward.

Notably, in third-quarter 2019, non-GAAP revenues and non-GAAP earnings were $558.8 million and 94 cents, respectively, flat year over year.

Zacks Rank & Stocks to Consider

Currently, SINA carries a Zacks Rank #5 (Strong Sell).

Some top-ranked stocks in the broader technology sector include Baidu (BIDU - Free Report) , Alteryx, Inc AYX and Applied Materials, Inc. AMAT. All three stocks sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Baidu, Alteryx and Applied Materials is currently pegged at 2.3%, 39.9% and 8.2%, respectively.

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