TH Capital: Sina's Portal Business In Transitional Phase

In a note to clients on Tuesday, Tian X. Hou of TH Capital reiterated a Hold rating (with no assigned price target) on Sina Corp (NASDAQ: SINA) following the company's in-line third quarter results.

According to Hou, Sina's fourth-quarter guidance was below what analysts expected as the company's portal business is transitioning to cope with many challenges from multiple directions.

“The strategy of the company's transition is mainly to deepen the content and operation of its strong verticals such as financial information, auto and sports,” Hou wrote. “We expect such transition efforts to last for another several quarters.”

Some of the challenges noted by Hou include a transition of users from PC to mobile, budgets shifting to performance based ads away from portal display ads and budgets shifting to vertical sites away from portal sites.

Sina is focusing on Internet finance, video and sports, according to Hou. The analyst adds that so far the company has seen “good” traffic increases and volume. However, these investments are expected to continue in the near-term and is required to generate meaningful revenue contributions.

Hou also adds that Sina continues to see “solid” progress on Weibo Corp (NASDAQ: WB) in which the company maintains a near 57 percent stake. The popular Chinese microblogging site saw its monthly active users grow 36 percent from a year ago to 167 million while daily active users rose 30 percent from a year ago to 76.6 million.

Given the increased popularity in Weibo, newer monetization opportunities are now present, including TV-Weibo interaction and monetizing content from the more than 10,000 "experts" that contribute premium content to the site.

Shares of Weibo are Buy rated with no assigned price target.