Sina, Weibo Shares Plunge on Weak Growth, Income Drop

Shares in both Sina and its subsidiary, Weibo, crashed on Thursday on lower-than-expected results in the third quarter.

Anthony Russo
    Nov 14, 2019 11:00 AM  PT
Sina, Weibo Shares Plunge on Weak Growth, Income Drop
author: Anthony Russo   

The stocks in Sina Corp. (Nasdaq: SINA) and its social media arm, Weibo Corp. (Nasdaq: WB), plummeted on Thursday after a miss on third-quarter revenue.

Sina, a Beijing-based online media giant, said in a statement today that its revenue in the three months through September was $561.4 million, up 1% year-over-year. Net income slipped to $20.4 million, or 28 cents per share, compared with $45.4 million, or 62 cents per share, a year ago.

Weibo reported its revenue reached $467.8 million, up 2% year-over-year in the third quarter. That was lower than the company's expected guidance of between 6% to 9% improvement for the period. Net income was $146.6 million, or 64 cents per share, compared with $167 million, or 73 cents per share, in the same period, a year ago.

In response to the news, shares in Sina tumbled nearly 18% to $34.15 per American depositary share by midday on Thursday, while Weibo plunged 16% to $44.20 per ADS.

"When the expectation for a stock is to have a jump in revenue, a 1% rise, as for Sina's case may not appear appealing," Arman Hassanniakalager, Assistant Professor in Finance at the University of Bath, told CapitalWatch in a statement today. "It could be explained by the company misleading the stock market and creating excessive optimism."

Sina said its ad revenue for the third quarter fell about 30% year-over-year to $50.1 million, which Boonie Zhang, its chief financial officer, attributed to the company's ad budget cut for SME customers in the period.

"Nevertheless, our SME revenue growth was still impacted by the pricing discrepancy on a year-over-year basis, though sequentially pricing has been stabilized," Zhang said in a conference call today.

She added, "The growth was largely offset by ad budget cutback from certain large ticket item category, with tough comps last year, under the current market, macro uncertainties and market competition."

The company's non-advertising revenues reached $100.4 million during the third quarter, up 37% from the same period last year, according to its statement.

Sina established Sina Weibo in 2009, which is known as the "Twitter of China" and has grown to be one of the biggest social media platforms in the nation. E-commerce giant Alibaba Holding Group Ltd. (NYSE: BABA) had acquired an 18% stake in Sina Weibo in 2013.

As of September, Weibo reported 497 million monthly active users, which represented an increase of 51 million year-over-year. It also averaged 216 million daily active users, up approximately 21 million year-over-year, according to Weibo.

Looking ahead, Weibo estimated revenue growth of between 0% to 3% in the fourth quarter.