SINA Corporation: Let’s Trade the Options of Chinese Companies

SINA Corporation (NASDAQ:SINA) leads the charge today as we start our options trading activity this week. SINA Corporation with a market capitalization of $2.20B operates an online media company focused on the People’s Republic of China and the global Chinese community. The company operates the digital media network portal: SINA.com, the mobile portal: SINA.cn and the social media platform: Weibo.com.

It might interest you to know that SINA Corp’s Weibo.com is China’s equivalent of Twitter. In addition, its SINA.com offers distinct and targeted professional content on each of its region specific Websites and a range of complementary offerings. SINA.cn provides information and entertainment content from SINA portal customized for wireless access protocol (WAP) users.

SINA Corp in My Sights

I became interested in trading the options of SINA Corporation last Friday after the company recorded a new 52-low of $33.15 before it ended the session with 0.51% loss to close at $33.33. You might be interested in knowing that the stock has a 52-Week high of $71.19. Hence, I was interested in knowing why a tech stock could have lost 53.43% within one year when its major “rival” Baidu (NASDAQ:BIDU) was up 27.31% within the same period.

The chart below (with my annotations) shows how the shares of SINA Corporation have been trading within the last one year.

SINA Chart

From the chart above, you’ll observe that the shares of SINA have been on an unmistakable decline in the last one year as the red arrow shows. You also observe that the stock has maintained a $35 support level since December 2014 (Green line) before it broke down below that $35 support last week as the red circle shows.

The shares of SINA Corp currently trade under their 50 and 200-day moving averages. More so, an RSI of 21.70 suggests that the stock is overbought. Nonetheless, I am pessimistic about the prospects of SINA Corp and I think you’ll be better off buying SINA put options.

Uninspiring Fourth Quarter Financials

SINA reported its fourth quarter Q4 2014 (transcripts) results last week on Tuesday to deliver what many uninformed investors and traders will call decent earnings. For instance, the company reported earnings of $0.24 per share to beat the consensus estimate of $0.18. The company also reported revenue of $208.5M to mark an 8.4% year-over-year improvement and to beat the analysts’ consensus estimate by $0.89M.

Nonetheless, the “untold” story about SINA’s earnings is that a large chunk of SINA’s earnings and revenue in the fourth quarters was contributed by its social media arm: Weibo.com. It might interest you to know that SINA spun of Weibo in an IPO earlier this year, but the 57% stake that it maintained in Weibo still allows it to record massive gains from the social media company.

For instance, SINA’s online advertising revenues in the fourth quarter climbed 14% on a year-over-year basis to $181.9M. Its portal advertising revenues declined 10% on a year-over-year basis to $94M. However, Weibo advertising and marketing revenues grew by 57% to $88M in the fourth quarter.

The importance of Weibo’s contribution to SINA’s “impressive” financials is summed up in the words of Charles Chao, Chairman and CEO of SINA Corp that …the growth in advertising revenues for 2014 was mainly from Weibo platform which grew 78% for the year… Again, advertising revenues from Weibo were the major contributor for the year-over-year growth in the fourth quarter, with 7 — with 57% increase, while advertising revenues from portal declined by approximately 10% for the same period”.

How to Trade SINA Options

I am camping with the bears on SINA Corporation and I recommend buying SINA put options. I am especially interested in the SINA Jun 2015 32.500 put (SINA150619P00032500) at an asking price of $2.08.

— Daily Option Alerts

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