Monetization Of Weibo A Tailwind For Sina

SINA Corp SINA would likely continue benefiting from the monetization of Weibo, “through the increasingly popular KOL economy in China,” JPMorgan’s Alex Yao said in a report. He initiated coverage of the company with an Overweight rating and a price target of $123.

Weibo Monetization

Weibo seems to be on track to monetize through China’s KOL economy, which is becoming increasingly popular. Analyst Yao expect Weibo to generate accelerated revenue growth and continued margin expansion over the next few years, which would more than offset softness in the portal ad business.

The price target for Weibo Corp (ADR) WB is at $70, which implies 32 percent potential upside to Sina’s current share price, Yao noted.

Stub Operation Undervalued

Sina’s stub value currently trades at -$645 million, following the rally in Weibo’s shares. The current value of Sina’s stub is significantly out of the range of -$296 million to $429 million over the last couple of years.

“With the market focusing predominantly on Weibo, Sina’s stub value is overlooked and undervalued, in our view,” the analyst commented.

Yao expects Sina’s revenue growth to accelerate to from 14 percent in FY16 to 35 percent in FY17 and 41 percent in FY18. Non-GAAP operating margin is expected to expand from 14 percent in FY16 to 22 percent in FY17 and 28 percent in FY18.

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