Why SINA Stock Fell 11.9% Last Month

What happened

Shares of SINA (NASDAQ: SINA) 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 data by YCharts.

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 (NASDAQ: WB), 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.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool recommends Sina and Weibo. The Motley Fool has a disclosure policy.

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