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Why SINA Corp Shares Slipped This Morning

By Brian Pacampara – Mar 18, 2014 at 9:57AM

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Does this analyst make a good case? Or is it just more noise from Wall Street?

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of SINA Corp (SINA) slipped about 1% this morning after Maxim Group downgraded the Chinese Internet portal from buy to hold.

So what: Along with the downgrade, analyst Echo He removed his price target of $90, an indication that he sees limited upside from the stock's current levels. So while traders might be attracted to yesterday's near-7% pop, He's call suggests that the looming IPO of Sina's Twitter-like service Weibo isn't as value-enhancing as many investors think.

Now what: According to Maxi, SINA's risk/reward trade-off is pretty balanced at this point. "In addition to Weibo's IPO price, we believe SINA's valuation should be affected by Alibaba's (private) purchase price of the Weibo IPO and the reduction of SINA's equity ownership of Weibo, both of which may be unfavorable for SINA," said He. "In our view, the potential post-IPO Weibo shareholder structure and SINA's current trading levels over our reduced EPS estimates both suggest that SINA is fairly valued." Of course, with the stock still off more than 25% from its 52-week highs, those concerns might be giving patient Fools a solid long-term growth opportunity.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Sina. The Motley Fool owns shares of Sina. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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