Please ensure Javascript is enabled for purposes of website accessibility

Why SINA Stock Popped 13% Today

By Rich Smith – Aug 19, 2019 at 12:16PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Forecasts still look weak, but actual earnings were strong.

What happened

Shares of SINA (SINA) leapt out of the gate after the company reported Q2 2019 results Monday morning. As of 12:10 p.m. EDT, the stock was up 13%.  

The Chinese online media company reported estimate-thumping earnings and sales for the quarter: $0.73 per diluted share earned on $533.1 million in sales, as calculated according to generally accepted accounting principles (GAAP), versus Wall Street's expectation for $0.47 per share in profit and $510.2 million in sales.  

Chinese dragon superimposed on a stock chart

Image source: Getty Images.

So what

Those sales were actually down 1% year over year, by the way. But because they beat estimates -- and because earnings grew so much, up 55% when no growth at all was anticipated -- investors seemed willing to overlook the fact that business slowed slightly.

Gross profit margin slipped from 80.1% last year to 76.7% in this year's Q2, a decline of 340 basis points. Operating margin fell from 25.3% a year ago to 23.6%, a smaller drop of only 170 basis points. Losses on sold investments, however, decreased, helping to improve pre-tax income, and less income "attributable to non-controlling interests" pushed up net profits even further.

Now what

Nevertheless, analysts are still seeing declines ahead for SINA. Despite this morning's earnings beat, the forecast for Q3 calls for a big 23% drop in profits. Analysts expect SINA to earn only $0.72 per share this quarter, and to end the year with earnings of $2.47 per share -- a 20% year over year decline.  

If those forecasts prove accurate, today's share-price surge could be presenting investors with a golden opportunity to exit the stock before things take a turn for the worse.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Sina. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SINA Corporation Stock Quote
SINA Corporation
SINA

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.