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Why Did Sina Fall Over 10% Yesterday?


May. 24 2019, Published 9:31 a.m. ET

Stock fell on disappointing results

Chinese (FXI) Internet company Sina (SINA) fell 10.1% on May 23, 2019. Sina announced its quarterly results yesterday and reported revenue of $475.1 million, a rise of 8% YoY. Adjusted EPS fell close to 15% to $0.40.

Wall Street estimated Sina to post sales of $473.18 million and earnings of $0.42 in the first quarter. So while Sina posted sales above estimates, it failed to beat analyst earnings estimates in the first quarter. Sina’s revenue growth was driven by advertising revenue that rose 6% to $388 million. Revenue from Sina’s Weibo microblogging platform rose 13% and somewhat managed to offset declines from its legacy portal segment. Non-advertising revenue for Sina rose 18% in the first quarter as well.

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Sina not very optimistic about guidance

Sina had earlier expected sales growth between 18% to 25% in fiscal 2019. However, CFO Bonnie Zhang stated that the company might not achieve its revenue target given the trade war escalation and the soft macroeconomic environment. This uncertainty also drove Sina stock lower on May 23, 2019.

Sina stock trading at 52-week low

Sina stock closed trading at $42.51 yesterday, which is 5.4% above its 52-week low and 56.0% below its 52-week high. Sina stock has now declined 32.4% this month and is down 21.0% since the start of 2019.

Chinese peers have also underperformed the market. Shares of JD.com (JD), Baidu (BIDU), and Alibaba (BABA) have declined by 11.8%, 31.8%, and 16% this month. But does this recent pullback provide a good opportunity for investors to buy this stock?

PE multiple

Sina stock is trading at a forward PE multiple of 10.0x. In comparison, its EPS are expected to rise over 9% in 2019 and by 25.0% in 2020. Its earnings are expected to rise at a compound annual growth rate of 21.0% in the next five years.

Sina’s estimated five-year PEG (PE-to-growth) ratio is 0.75x. A PEG ratio of below one suggests that a stock is undervalued. Sina also looks undervalued at its current price and seems like a good pick considering its robust earnings growth.

There might be some short-term correction if the trade war further escalates between China and the United States.


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