SINA (NASDAQ:SINA) blew past Wall Street expectations last quarter but saw its stock price drop more than 15% last Friday. After SINA announced slower Q4 growth, the resulting fear seemed to have gotten the best of Wall Street. Then on Monday morning, SINA was once again soaring as reports indicated that Alibaba is interested in a stake in Weibo. To overcome your inner bear and rake in huge returns, here's what you need to know about SINA's last quarter.
Wall Street analysts were delighted to see SINA's top line grow year over year for the fourth consecutive quarter. The company increased revenue by 17% to $152.4 million, up from $102.6 million in the year-ago quarter. Also beating bottom-line expectations by more than $0.05 a share, the company reported adjusted net income of $0.17 per share.
In total, the media company shot to $9.9 million in profits -- far better than its loss of $336.3 million a year earlier, when the company had to write down investments in China Real Estate Information and e-tailer Mecox Lane.
Fear grips analysts
Despite the good news, SINA's Q4 forecasts spooked Wall Street. Pointing to China's slowing GDP growth, SINA announced that its revenues will take a 13% hit from last quarter, at their midpoint hitting $134 million.
One bit of consolation is that China's sputtering economic engine has hurt even the biggest tech giants. In late October, Baidu (NASDAQ:BIDU) announced quarterly revenue growth of "only" 49.7% -- the slowest it's seen in more than two years. Renren (NYSE:RENN), the "Facebook of China," saw its online-advertising sales decrease 14% year over year, citing a weak economy.
SINA is also facing greater competition. Though SINA's Weibo – a Twitter-like platform – has largely won the microblog battle, Tencent's WeChat has ramped up to more than 200 million users. As the tech scene in China continues to heat up, SINA may also see increased competition from Sohu (NASDAQ:SOHU) in the social-media realm.
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Though competition is fierce, SINA's competitors seem more focused elsewhere. Sohu, Baidu, and Tencent all have online video arms that are battling for relevance in the cutthroat space. Earlier this year, Youku and Tudou merged to become Youku-Tudou (UNKNOWN:YOKU.DL); once the merger is completed, the company will become the most trafficked video website in China by a wide margin.
Meanwhile, SINA remains the leader in microblogging. The company boasts 400 million users and has seen revenues grow year over year for the past four quarters. Already, Weibo is seeing more mobile traffic than PC traffic. SINA will launch a new mobile-focused payment system this quarter and roll out a feature similar to Twitter's "Promoted Tweets" to increase ad revenue from SMEs. Although there are fears that China's economic slump may hurt it, SINA has positioned itself to benefit from the mobile wave. If anything, reports of Alibaba's interest in acquiring a stake in Weibo validates the company's dominant position at the center of Chinese social media. At the moment, SINA still looks like a great buy, but I would caution you to research more to determine whether it's the best fit for your portfolio.
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Fool contributor Kevin Chen has no positions in the stocks mentioned above-follow him on Twitter @k2chen. The Motley Fool owns shares of Baidu. Motley Fool newsletter services recommend Baidu, SINA, and Sohu.com. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.