Brean Expects Solid Growth From Sina, Driven By Weibo

Brean Capital's Fawne Jiang maintained a Buy rating on SINA Corp SINA, with a price target of $55.

The company reported strong Q4 results, driven primarily by robust growth at Weibo. SINA's non-GAAP net revenue beat the consensus, while brand advertising grew 23 percent year-on-year, driven by robust ad growth of 47 percent year-on-year at Weibo.

Total Weibo net revenue increased 42 percent year-on-year during the quarter, with VAS revenue increasing 13 percent year-on-year, driven mainly by membership and gaming revenue. The company's non-GAAP EPS also beat the consensus, driven by operating leverage.

"The company guided FY2016 Non-GAAP revenue growth below Street expectations mainly attributable to currency impact," according to the Brean Capital report.

Management also guided to Weibo revenue for 1Q16, with the mid-point below the current consensus expectations.

Analyst Fawne Jiang expects "portal stabilizes (excluding currency impact) despite macro headwinds, while Weibo's revenue growth remains solid" during 2016.

Weibo's continued robust growth through the year is likely to be driven by solid SME ad growth, along with higher budget shift from brand advertisers, due to the rise of social advertising.

"Additionally, SINA's overall margin outlook will likely continue improving upon further operating leverage from Weibo and stabilization of portal business," Jiang said.

The analyst believes that from an asset perspective, the market is undervaluing SINA's shares, especially given the potential for improvement in the outlook for both margins and growth.