With shares of Sina Corporation (NASDAQ:SINA) trading at around $56.42, is SINA an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock's Movement
Sina was once top dog in the Internet Software & Services industry in China. That was until the competition became fierce. However, Sina now has Weibo, which is pretty much the Chinese version of Twitter.
At the end of 2012, Weibo had 503 million registered users. Since that's a difficult number to comprehend, think of it this way – that's 200 million more people than the entire United States population! Needless to say, there will be many monetization opportunities via Weibo.
Weibo's traffic has steadily increased over the past three months. However, it's not dominating as much as it has in the past. Over the past three months, pageviews-per-user has declined 5.60 percent, time on-site has declined 4 percent, and the bounce rate has increased 2 percent. Never fear, though, Alibaba Group Holding Ltd. recently agreed to buy an 18 percent stake for $586 million. This will help advertising sales.
As far as Sina itself goes, traffic has been relatively stagnant over the past three months. Also over the past three months, pageviews-per-user has declined 3.46 percent, time-on-site has declined 1 percent, and the bounce rate has increased 3 percent. These aren't worrisome numbers; they're just not inspiring.
Sina has consistently improved revenues on an annual basis, and it showed a profit in 2012 after two years of losses. Sales are also expected to increase 18 percent this year. As far as analysts go, they like the stock: 17 Buy, 5 Hold, 3 Sell.
There are three big concerns for Sina. One is increased competition that will not back down. Two is poor valuation (trading at 121 times earnings). Three is that the stock will not be resilient in weak markets.
Now let's take a look at some comparative numbers. The chart below compares fundamentals for Sina, Sohu.com Inc. (NASDAQ:SOHU), and Baidu (NASDAQ:BIDU). Sina has a market cap of $3.77 billion, Sohu has a market cap of $2.05 billion, and Baidu has a market cap of $31.23 billion.
| SINA | SOHU | BIDU | |
| Trailing P/E | 121.07 | 25.55 | 18.47 |
| Forward P/E | 32.06 | 15.60 | 14.29 |
| Profit Margin | 6.00% | 7.71 | 44.21% |
| ROE | 2.89% | 14.13 | 44.08% |
| Operating Cash Flow | $32.61 Million | N/A | N/A |
| Dividend Yield | N/A | N/A | N/A |
| Short Position | N/A | 8.20% | N/A |
Let's take a look at some more important numbers prior to forming an opinion on this stock.
E = Equity to Debt Ratio Is Strong
The debt-to-equity ratio for Sina is stronger than the industry average of 0.10. None of these companies have debt concerns, but Sina is at the top of the class in this area.
| Debt-To-Equity | Cash | Long-Term Debt | |
| SINA | 0.00 | $713.60 Million | $0 |
| SOHU | 0.19 | $951.67 Million | $270.50 Million |
| BIDU | 0.40 | $5.39 Billion | $1.90 Billion |
T = Technicals Are Strong
The numbers below can be deceiving. The last two years as a whole have been difficult for Sina. The past year also hasn't been impressive. The real strength has been over the past month, but can it continue?
| 1 Month | Year-To-Date | 1 Year | 3 Year | |
| SINA | 18.52% | 12.29% | -0.90% | 70.88% |
| SOHU | 14.43% | 13.71% | 14.05% | 18.80% |
| BIDU | 6.83% | -10.96% | -31.32% | 33.68% |
At $56.42, Sina is trading above all its averages.
| 50-Day SMA | 49.95 |
| 100-Day SMA | 51.30 |
| 200-Day SMA | Top Growth Companies To Watch In Right Now53.01 |
E = Earnings Have Been Inconsistent
Earnings have been inconsistent, but once again, Sina did show a profit in 2012. Revenue has steadily increased for three years.
| 2008 | 2009 | 2010 | 2011 | 2012 | |
| Revenue ($)in millions | 369.59 | 358.57 | 402.62 | 482.83 | 529.33 |
| Diluted EPS ($) | 1.33 | 6.95 | -0.31 | -4.64 | 0.47 |
When we look at the previous quarter on a year-over-year basis, we see an increase in revenue and a decline in earnings. Both revenue and earnings declined on a sequential basis.
| 12/2011 | 3/2012 | 6/2012 | 9/2012 | 12/2012 | |
| Revenue ($)in millions | 133.37 | 106.22 | 131.60 | 152.38 | 139.13 |
| Diluted EPS ($) | 0.14 | -0.21 | 0.49 | 0.14 | 0.04 |
Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
T = Trends Might Support the Industry
This simply comes down to the Chinese economy. Is it slowing down? Is it rebounding? The reports seem to change every day.
Conclusion
Weibo has put Sina back on the map. As long as Sina doesn't make a critical error, Weibo should remain incredibly valuable. However, due to poor valuation and a questionable Chinese economy, Sina is a neutral WAIT AND SEE.
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