INTERNET: Sina Jumps on Weibo, JD Inches Towards Profits
Bottom line: Sina’s latest financials show it could be benefiting from recent woes at Baidu, while JD.com’s results show its growth is slowing as it moves towards its important goal of becoming profitable.
Two of China’s top Internet companies have just reported their latest quarterly earnings, with web stalwart Sina (Nasdaq: SINA) wowing Wall Street with new numbers that show its Twitter-like Weibo (Nasdaq: WB) service may finally be gaining some traction. Meantime, investors were less impressed by e-commerce giant JD.com (Nasdsaq: JD), which continued to post strong revenue growth but remained squarely in the loss column. JD tried to comfort investors by saying its operations are now quite profitable on a non-GAAP basis, but that didn’t seem to change sentiment too much.
Let’s jump right in with Sina and Weibo, who might be two of the biggest beneficiaries of recent woes due to a transparency scandal at online search giant Baidu (Nasdaq: BIDU). All 3 companies are heavily dependent on advertising for their revenues, and Baidu is the clear leader in that space. But the scandal earlier this year dealt a major long-term setback to Baidu, and it now appears that Sina and Weibo could be benefiting from that.
Shares of both Sina and Weibo soared after their numbers came out, up 15.2 percent and 12.5 percent, respectively, as each beat profit forecasts. We’ll focus mostly on Sina, since it consolidates Weibo into its own results. Sina’s core online advertising revenue rose by a healthy 16 percent, with Weibo responsible for all of the gains as revenue for Sina’s older portal business actually fell. (company announcement; Chinese article)
Sina’s profit growth was much stronger, with the company reporting a four-fold increase in net profit to $43 million, and a return to profitability on an operating basis. Equally encouraging was Sina’s announcement that it was raising its outlook for this year. The company said it now expects to post full-year revenue of $950 million to $1 billion, up from a previous forecast of $850 million to $950 million.
Frankly speaking I’m slightly surprised that Weibo is performing so well, especially when its US counterpart Twitter (NYSE: TWTR) is doing so poorly. Weibo was once a high flyer, but later lost momentum and was overtaken by Tencent’s (HKEx: 700) more popular WeChat mobile messaging service. But at least based on its latest results, Sina appears to be having some stronger success than Twitter at wringing money out of Weibo.
JD Loss Narrows
From Sina and Weibo we’ll move on to JD.com, which has just posted results that show continuing strong revenue growth but also continuing losses. The company’s shares did rise 2.8 percent in after-hours trade after the results came out, so clearly investors weren’t disappointed by the figures, even if they weren’t overly impressed.
JD made headlines earlier this year when it became the first Chinese Internet company to be included in the Fortune 500, beating out better known names like rival Alibaba (NYSE: BABA) and Tencent. (previous post) But JD got that distinction mostly for technical reasons, since its business model allows it to post relatively high figures for revenue, the metric used by Fortune magazine to determine the world’s 500 biggest companies.
JD’s revenue looked relatively strong for this year’s second quarter, rising 42 percent to 65.2 billion ($9.8 billion), which was largely in line with expectations. JD’s bottom line continued to stay squarely in the red, with the company reporting a net loss for the quarter of 132 million yuan. But that figure did mark a sharp improvement from a year earlier, when the company posted a 510 million yuan loss.
JD said that third-quarter revenue growth is likely to slow to around 35 percent, with the figure expected to come in between 59 billion yuan and 60 billion yuan. Investors probably weren’t too excited about that, even as other companies show similar trends due to China’s slowing economy. At the end of the day the results look general positive though not too exciting, and I expect investors will continue to focus on the bottom line as they wait for this e-commerce giant to finally become profitable.
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