ChinaCache Internatnl Hldgs Ltd (ADR) (CCIH), Renren Inc (RENN), SINA Corp (SINA): Under the Radar Chinese Internet Stocks to Follow

The Twitter of China

Of the group, SINA Corp (NASDAQ:SINA) is the largest with a $3.8 billion market cap. The company owns the Weibo service, which is seen as the most widely used Twitter-like service in that country. The stock isn’t overly cheap trading at roughly 6 times estimates for 2013 revenues or 5 times excluding cash. The stock also trades at 30 times a forward earnings, even as accelerating revenue growth in 2014 is expected to only reach 26%.

The encouraging part is that Twitter is valued around $10 billion in the US, placing the valuation of SINA Corp (NASDAQ:SINA) at only 40% of the value. The amazing part is that SINA Corp (NASDAQ:SINA) had a Twitter-like valuation back at the start of 2011 when the stock surged to over $140, but it now only trades around $57. The potential exists for this Chinese internet stock to reignite some of that excitement now that the sector has consolidated for nearly two years now.

Bottom line

While some of these internet stocks have had minor bumps recently, the stocks still trade considerably below comparative valuations in the US and the levels seen a few years back. Revenue continues to grow in the 25% range for all of these stocks even during a tough economic period in China and all of Asia. Once the economy rebounds and investors become more comfortable that these larger technology stocks in China don’t carry the same fraud risks as the reverse merger stocks, the sector could see huge gains down the road.

ChinaCache Internatnl Hldgs Ltd (ADR) (NASDAQ:CCIH) and Renren Inc (NYSE:RENN) come with considerable risks, as each company faces competitive pressures from larger firms that could squeeze growth and margins. SINA Corp (NASDAQ:SINA), on the other hand, offers a compelling valuation, especially compared to the rich valuations of domestic social media networks such as Twitter.

The article Under the Radar Chinese Internet Stocks to Follow originally appeared on Fool.com and is written by Mark Holder.

Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool recommends SINA. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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