What happened
Shares of SINA (SINA +0.00%) fell 11.9% in November, according to data from S&P Global Market Intelligence. The stock sank following the publication of the company's third-quarter results.
SINA published quarterly results on Nov. 14 and actually reported sales and earnings performance that topped the market's estimates. Its social media subsidiary, Weibo (WB +1.02%), also published quarterly results on the same day, with earnings topping expectations but revenue falling short of the market's average target.
SINA owns a controlling stake in Weibo, a microblogging platform that's often referred to as "China's Twitter," and the spinoff business accounts for the majority of its parent company's revenues. The subsidiary's third-quarter sales miss and weak guidance resulted in both stocks sliding double digits in the month.
Image source: Getty Images.
So what
SINA recorded adjusted earnings of $0.94 per share on sales of $561.45 million in the third quarter, while the average analyst target had called for per-share earnings of $0.71 on sales of $557.76 million. Sales and adjusted earnings were both up 1% year over year in the quarter. The Weibo segment accounted for roughly 83% of total GAAP revenue in the quarter.
Non-GAAP sales for the period were $558.8 million, up 1% year over year and 5% on a constant currency basis. The company's advertising revenue declined 5% year over year to $461.1 million, but non-advertising revenue rose 37% to $100.4 million.
Weibo actually beat projected earnings targets in the third quarter, with its $0.77 adjusted earnings per share topping the average analyst estimate for $0.73. However, sales of $467.8 million fell short of the analyst target by roughly $4 million, and weak guidance from the microblogging company prompted steep sell-offs for both stocks.
Now what
Weibo guided for sales to grow between 0% and 3% in the fourth quarter and gave a cautious outlook for the broader advertising market in China. Management indicated that it continues to see ongoing issues soft demand from small and medium enterprises and pressure from rival short-video platforms. That suggests a challenging outlook for SINA as well, given that so much of its business is derived from its microblogging subsidiary.
SINA has lost roughly 46% of its value over the last year, and the Chinese tech stock now trades at roughly 12.6 times this year's expected earnings.
