Brean Following Sina's Q3 Results: 'Solid Growth Empowered By Weibo'

Brean Capital maintains its Buy rating on SINA Corp SINA following the online media company’s better-than-expected third-quarter results on robust ad growth from Weibo Corp (ADR) WB, which saw continued user growth and accelerated monetization from KA.

Quarter Results

Sina’s non-GAAP EPS came in at $0.56, exceeding consensus of $0.36 by $0.20 mainly due to improving gross margin and operating leverage from Weibo. Non-GAAP net revenue rose 22 percent to $272.3 million, topped consensus estimate of $266 million.

The ad revenue of Weibo, Sina’s largest asset, grew 48 percent to $156.7 million, while Weibo VAS revenue improved 7 percent to $20.2 million.

“We continued to view Weibo as a key beneficiary of China’s online advertising market particularly in mobile, social and video,” analyst Fawne Jiang wrote in a note.

Jiang sees continued improvement in user engagement for Weibo on enriched content and multimedia offerings. The analyst also expects the development of KOL economy could further unlock Weibo’s monetization potential down the road.

A Look Forward

Looking ahead, Weibo’s fourth-quarter revenue guidance was $205 million–$210 million, exceeding consensus expectations of $197 million.

Moreover, Jiang anticipates further improvements to Sina’s margin profile due to operating leverage from Weibo and cost controls from portal.

“We are positive on SINA shares and believe that from an asset perspective, the company is undervalued, factoring SINA’s majority ownership in WB, its large cash balance, and its investment in multiple valuable assets,” Jiang added.

Shares of Sina closed Monday’s trading at $67.29. In the pre-market hours Tuesday, they rose 2 percent to $68.70, while Jiang has a price target of $100.

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