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September 4, 2009
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SINA Corporation (SINA) has been downgraded from Outperform to Neutral, indicating that the stock would be trading in line with the industry. The company is a leading provider of online media and value-added information services to the global Chinese community.
Although SINA’s most recent quarter (second quarter) results beat Zacks Consensus Estimates, they have been down on a year-over-year basis. The company provided disappointing guidance, as customer caution is likely to be a hindrance to advertising spending, particularly the brand advertising segment.
Economic growth in China has continued to slow down in the face of the protracted global economic downturn. Competition in the online brand advertising field in China is fierce, crowded by big players such as Sohu.com Inc. (SOHU), Shanda Interactive (SNDA) and Baidu, Inc. (BIDU).
Moreover, uncertainty regarding the closure of the Focus Media Holding Ltd. (FMCN) acquisition poses further risks to its shares. The acquisition entails the takeover of substantially all of the assets of Focus Media's digital out-of-home advertising networks, including its LCD display network, poster frame network and in-store network.
SINA is expected to benefit from the growing trends in the wireless business. While year 2009 is expected to be tough for SINA with low visibility for its advertising business, we expect sequential improvement as spending recovers.
SINA has a strong financial position with net cash (cash & equivalent less convertible debt) of $8.30 per share in the most recent quarter. Meanwhile, to return value to its shareholders, SINA has been actively repurchasing shares.
However, with bleak third quarter guidance, SINA is also facing severe competition in its mobile business and expects it to be flat in the next few quarters. Near-term, we have low visibility in SINA’s business.
Our six-month price target on SINA is $32.
Read the full analyst report on "SINA"
Read the full analyst report on "SOHU"
Read the full analyst report on "SNDA"
Read the full analyst report on "BIDU"
Read the full analyst report on "FMCN"
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