Why SINA Shares Surged
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Chinese Internet portal SINA (NAS: SINA) climbed 14% today as investors cheered its first-quarter results and management's comments regarding its Twitter-esque Weibo service.
So what: The stock has been beaten in recent months on regulatory uncertainty surrounding Weibo, but today's first-quarter beat (loss of $13.7 million versus the consensus of a $19 million loss) coupled with the news that management is testing advertising on Weibo, allays some of those fears. At the end of March, Weibo boasted a whopping 324 million users, so it's no surprise that investors are salivating over the monetization prospects.
Now what: Management warned of further operating losses and margin decreases in coming quarters as it increases its already-big bet on social media. "The initial feedback from advertisers on our Weibo advertising is encouraging," CEO Charles Chao said, "and we believe it is critical that SINA continues its significant investments in social media and related initiatives." When you couple Weibo's long-term profit potential with the fact that the stock is still down more than 50% from its 52-week highs, the risk-reward trade-off seems attractive at this point.
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of SINA. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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