Sina Should Beat Earnings in a Google-Like Fashion

Google's recent earnings report has laid the groundwork for the premise that internet search companies are not as linked to the overall economy as one would think. Google crushed estimates and looks headed to its old high of 700.

This should not be surprising as most internet connections are used at work, but if you lose your job as unemployment increases, there would be a propensity to be on the internet at home looking for another job or just checking baseball scores.

This disconnection from the economy in the United States looks to be the same in China. Internet cafes and other places to log on are available all over the country’s major cities. Even as the stock market, which is linked even closer to China’s economy than that of the United States, has shown their economy slowing, this should not stop the growth in companies like SINA who should do well. The recent pounding this stock has taken was surprising, but it has gone down with the rest of the Chinese stocks.

Analyst estimates have this company increasing earnings growth quarter over quarter by 42%. Quite bullish for this stock is the fact that the stock has started making a run upward, but over the last 30 days analysts have not upgraded the stock. This earnings estimate is based on quarterly revenue growth year over year of 31%. SINA has also beat earnings for the past four quarters and seen some punishment in the stock.

I believe SINA will come in at $.30 a share this quarter and beat on revenues based on their consumer growth possibility. Every year 20 million people move from rural to urban areas in China. With this comes the ability to search the web. Obviously BIDU will get the majority of subscribers, with Google and Yahoo also doing well, but SINA seems to get forgotten. On a valuation, this company is cheap. BIDU is trading with a PE of over 120 and Google sells for 40, while SINA has a slight markup at 59.

Looking at the chart, SINA had a triple top breakout on May 12th and its current trend points to a price of $84 if it continues. The simple 50 day moving average has been breached. The stock seems to have put a bottom in at $47 and is a good trade if you plan on getting out at $58. That point should be broken by ten times volume in order for it to become support.

Overall, we must remember to invest in sectors, especially in times that are as difficult. The current environment here and abroad does have many question marks and the economy has as many bears as bulls. The internet is still a high growth area that will continue to move going forward.

Disclosure: No position

Comments

[weng ho teng:]

Sina and suho are my favorites in this space. A little known gem is also om my list. MYST.OB

2008 May 14 08:30 AM

[legmaker:]

Thank you weng ho teng for your comment, do you have any info on MYST.OB? I think this entire space looks good going forward, seems to be insulated from over all economic environment and has great growth as a kicker.

2008 May 14 09:05 AM

[raman kandola:]

SINA would rock tonight !

2008 May 14 09:07 PM

[Srfnflmngo:]

Wow, I actually bought some June $60 calls this afternoon and am glad I did....Tomorrow will be fun!!!

2008 May 14 10:06 PM

[legmaker:]

Currently SINA is up 3.8% since recommendation. If you would like to see how some of my other recommendations are doing check my blog at:
www.updown.com/userBlo...

PWAV another favorite, doing well after earnings.

2008 May 18 11:58 AM

[borisb:]

Sina has cooled off 60 > 43 despite fairly good earnings beat& guidance and long term positioning. at this point the deep dip should work for most long term investors.

2008 Jun 27 05:01 PM