Goldman Sachs Comments On SINA Corporation Following In-Line Earnings

SINA Corporation SINA reported in-line revenues and profit 5% above consensus for 4Q. Advertising grew 30% in 4Q and was guided to grow 31%-34% YoY in 1Q11. 1Q11 revenue guidance was slightly soft. Weibo user growth was strong as we expected, surpassing 100mn registered users, but SINA management de-emphasized monetization this year, focusing instead on building scale, apps/portal-integrated ecosystem, and developing monetization channels, especially in light of stronger competition. Hence, product development and marketing spend will increase significantly in 2011, with at least 1,000 headcount to be added off a base of 3,500. Combined with a shift in video strategy to acquire more content, Goldman forecasts margins to come under material pressure this year. Goldman think SINA's decision to ramp Weibo investments to cement leadership and optimize its ecosystem, rather than rushing to monetize prematurely, makes sense, but slower monetization restricts valuation. Valuation upside could come from more meaningful Weibo monetization and if related losses were separated, thereby boosting portal value in SOTP. Goldman Sachs has a $78 PT and Neutral rating on SINA SINA closed Tuesday at $82