Sina Earnings Review: First Quarter 2009

Sina (SINA: 42.78 +1.83%) reported mixed first quarter 2009 results after the market closed on Tuesday, June 9. The company reported EPS of $.23 which exceeded analyst expectations of $.22. However, revenue came in at $73.8 million which was below Wall Street consensus estimates of $75.4 million.

Key Highlights

The earnings results were not bad, but the lackluster revenue growth was certainly disappointing. Highlights include:

Revenues increased only 3% y/y to $73.8 million (after growing 44% in the fourth quarter)
Offered second quarter revenue guidance of $85 – 89 million below the current consensus estimates of $90.7 million
Advertising revenues declined 10% to $43.2 million
Non-advertising revenues increased 30% to $30.6 million
Exited the quarter with $564.3 million in cash & short term investments

“The uncertainty in the Chinese economy at the beginning of the year had a severe impact on our online advertising business in the first quarter of 2009. Although market visibility is still relatively low, we have seen improved confidence and sentiment among our advertisers.” said Charles Chao, CEO of SINA. “While fighting the tough economic cycle, we remain focused on our long-term strategy in building the leading online media platform in China by investing in products, content and brand. We believe our investments in the downturn will make SINA a more competitive company in the long run when the Chinese economy further recovers.”

Earnings Analysis

The company’s official guidance projections are clearly disappointing. At the midpoint of the guidance range, revenues are expected to decline by 5% in the second quarter.

Share Performance

Sina’s shares are down 7.8% this morning following their earnings release. However, since the beginning of the year, the stock is up over 31%.

Recommendation

Sina’s growth story appears to be vanishing and we would expect investor interest to vanish with it. We would expect the stock to continue to decline in the short term and Wall Street lowers its expectations for Sina’s performance in future quarters.

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