Shares of Chinese Internet company Sina Corp. (SINA) surged more than 12 percent on Thursday, their highest level since May, after the company’s second-quarter earnings tripled.
Sina, which operates China’s Twitter-like microblogging site Weibo, reported a net profit of $33.2 million, or $0.49 per share, from $10 million, or $0.15 per share, a year earlier. That beat a $1 million Q2 loss expected by analysts polled by Thomson Reuters. Revenue rose 11 percent to $131.6 million, up from $118.96 million in the year-ago period.
In a research note to clients Piper Jaffray analysts, after reiterating the firm’s ‘Overweight’ rating and $90 price target on the shares, noted that Weibo monetization, which is based on offering special services to business accounts and selling VIP memberships to regular users, started during Q2 and generated 10% of all ad revenue for the quarter. Sina’s advertising revenue increased 12% to $103.1 million, while non-ad revenue grew 4.8% to $28.5 million.
“We are pleased to continue to grow SINA’s online advertising business despite a challenging macroeconomic environment in China,” said Charles Chao, CEO of SINA. “Our investment in Weibo.com is showing continued traffic momentum, which helps strengthen SINA’s brand, media influence and high-end user reach as well as positions SINA to grow market share in online advertising.” Mr. Chao added.
Weibo’s registered users grew 13.6% from the previous quarter to 368 million at the end of June. Sina’s Weibo has about 65% of China’s Twitter-like microblogging market.
From a technical perspective, shares of Sina Corp., which hit a new multi-year low of $43.12 on July 17, 2012 from a high of $142 in April 2011, and simply couldn’t rebound, have been on an upward trajectory over the past month. The stock jumped $7.30, or 13.2 percent, to $58.20/HOD during the last session, as nearly 15 million shares, more than 5x the ticker’s 3-month average daily volume changed hands, prompting SINA to move up across its 200-day moving average of $56.44. A sustained move above the MA could signal the development of an uptrend for the equity.
Considering SINA has gapped up sharply higher here with massive volume, it could print the tape at $60 per share relatively soon if it sustains the newly found support and momo at the $56 level.
In terms of valuation, shares currently trade at 48x forward earnings. At quarter end, the company recorded a profit and operating margin of (61.20%) and (0.57%), respectively. Sina’s price relative to its earnings growth potential remains high at 14.25. Based on most recent quarter, the company has roughly $770 million in cash versus $2.2 million debt. Book Value p/sh: mid-$16.
The stock of the $3.7 billion market cap company has traded between $43.12 and $114.89 over the last 52 weeks.