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Why SINA Stock Popped 13% Today

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

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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.

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