Sina (SINA, Financial) is a Chinese online media company for Chinese communities around the world. The company operates four major business lines: Sina Weibo, Sina Mobile, Sina Online, and Sina.net. Sina has over 100 million registered users worldwide; however, even that didn’t prevent the stock from falling close to 15% in the last 12 months. The stock faces many challenges going forward and despite the drop in valuation, it should be avoided.
Future looks dim
In the Q4FY14, total net revenues rose by 7% on a year-over-year basis followed by growth in advertising revenues of 14%. For the year-over-year growth, advertising revenues from Weibo performed very well by becoming main contributor, with 57% upsurge, while advertising revenues from portal dropped by about 10% for the similar era.
For the year 2014, overall net revenues and advertising revenues rose by 16% and 22% to $768 million and $640 million, respectively. Again, Weibo platform plays an important role for growth in advertising revenues which grew 78% for the year. Sina's non-GAAP net revenue rose 8% year over year to $208.5 million in the fourth quarter.
Actually, there was a decrease in revenue by 15% when excluding WB, emphasizing the challenges that SINA’s portal business faces among the near-term restructuring.
SINA’s net income was reduced due to a big jump in operating expenses. Operating expenses rose by a third followed by marketing expenses, advanced personnel costs and other expenses linked to bad debt making up record of the upsurge. Until SINA starts making progress with its chief portal, SINA won't motivate considerable assurance as anything other than a holding company for its pale in Weibo.
SINA's lackluster performance represents a significant issue for investors, in light of the fact that its opponents aren't obliged by as far as possible. Baidu, for instance, is poised to see sales climb more than 40% this year, and investors expect 30% or more development in 2016, too. Taken without anyone else's input, Weibo can possibly develop at a just as amazing rate, yet SINA's entry business is keeping the organization down significantly, making it look considerably less like a common Chinese Internet development stock.
Does a Buyout Make Sense?
A buyout can put Sina investors out of their woes, however, even that doesn’t look likely. Principal web portal Sina has been in the list of one of China’s recurrent Internet underperformers, prominent to infrequent conversation that it might become a takeover target for a superior, better-run peer. To avoid hostile takeover, Sina scheduled to renew their “Poison Pill” plan. This specific decision looks like a formality than an indicator of an approaching takeover proposal, meanwhile Sina launched the original plan 10 years before and perhaps it is currently set to perish. Sina is reintroducing the plan in very public way, so that it may sense like it could become a takeover target in the existing hot climate for Chinese Internet M&A.
Conclusion
Given that Sina’s towering expenses have not been matched the company’s revenue growth, the stock's plunge doesn’t look surprising. The company’s excessive dependence on Weibo and stiff competition make it a bad investment idea and thus it should be avoided at the present valuations.
