Sina Wows With Loss, Weibo Gains 新浪亏损而股价大涨，微博有收获

By newsdoug on May 16, 2012

Sina reports quarterly loss When is a loss a good thing? In my opinion the answer should be “never,” but investors seem to be taking a different view based on the share price reaction for leading web portal Sina (Nasdaq: SINA) following release of its latest quarterly results. (results announcement) Frankly speaking, I don’t see why investors are getting so excited. Perhaps the results weren’t as bad as many had feared, and perhaps some are encouraged by the progress in monetizing Weibo, Sina’s wildly popular microblogging service that recently passed the 300 million user mark, with more than half of active subscribers accessing the service over mobile phones and tablet PCs. (Chinese article) Whatever the reason, Sina’s shares are up about 7 percent in after-hours trading, though that’s coming off the lowest levels the stock has seen in more than a year. Let’s take a look at the actual results for a better view of what to me looks like a weak quarter. Sina took a rare swing into the red in the first 3 months of the year, reporting a $13.7 million loss versus a $15 million profit a year earlier. But most worrisome was the fact that Sina also reported an even rarer operating loss of $18.1 million for the quarter. Equally worrisome in the latest results were the sharp slowdown in advertising, one of Sina’s main revenue sources, which grew just 9 percent. Other reports point out the advertising slowdown was already a known factor, and that the company’s net loss for the quarter was actually slightly better than analyst forecasts, which could account for the optimistic reaction to the company’s share price. Furthermore, the company also forecast that its advertising revenue growth should rebound slightly in the current quarter meaning it doesn’t see the situation deteriorating in the next few months. From a broader perspective, I said last week that I liked Sina’s plans to roll out a points rating system for Weibo that would allow users to judge each others’ credibility, which seemed like a good proactive move to address Beijing’s concerns about the spreading of false rumors on the microblogging site. (previous post) That kind of action will be especially important as Sina tries to turn Weibo into a profit engine, since the company seems to be taking a lax attitude towards implementing a real-name registration requirement for the service mandated by Beijing. In fact, the regulatory risk factor probably remains the biggest danger for Sina going forward, as Beijing could theoretically order Sina at any time to immediately close all accounts that haven’t registered by their real names, which I would expect is at least half of the 300 million users. All that said, look for a mild rebound in Sina shares over the next few weeks on this latest report, though that could easily change if any new negative sounds come out of the government in Beijing.

Bottom line: A jump for Sina shares based on its latest results is probably due to relief that the numbers weren’t worse than expected, with a modest rally likely in the next couple of months.

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