The company still has a way to go to boost its revenue, and should be able to do so over the coming years. The company was founded in 1999, and at this point I expect the company to start monetizing its platform. If the company can’t start making profits from its users then the earnings will languish for years to come. The Social media monetization is still new, but more long-term investors will benefit owning SINA Corp (NASDAQ:SINA).
A struggling Renren
The good news for SINA Corp (NASDAQ:SINA) is that it is already ahead of the competition. There is a company in China that could have been considered “The Facebook (NASDAQ:FB) of China,” but it failed to implement its plan well. This company that is struggling is known as Renren Inc (NYSE:RENN). Renren has been having difficulties, which is why SINA will be a safe investment for years to come.
Part of Renren’s problems is that the social media company is focused on being popular with high school and college students. It’s a mistake not to target the higher age group. Just look at the success of Facebook Inc (NASDAQ:FB). It has acquired a lot of middle-aged users. I think that Renren is a shaky investment, and investors should be cautious when starting a position on this name.
Renren has a market cap of $1.2 billion, but still I don’t think that the stock price is justified. The value isn’t justified here, because the earning growth over the next five years will be a -20% growth. Also the growth of the company this year is only estimated to be at 3%. The company has been decreasing in popularity, according to Alexa starting at the No. 16 spot at the time of the Renren IPO, but is now currently at the No. 25 spot in China. I think that Renren is struggling to gain users, as more people are playing games on SINA’s website. They are also using Weibo as their social media service, and avoiding Renren altogether.
A Lesson from Facebook
What can SINA Corp (NASDAQ:SINA), and Renren learn from Facebook? Facebook is in a better position, because it has been able to monetize a lot of its users. Facebook has been increasing advertising revenue, and has started to boost its mobile advertising revenue. Almost one-third of advertising revenue came from mobile advertising. That is impressive for a company that had launched its mobile advertising not too long ago.
Facebook missed on EPS reporting $.12 per share, compared to the analysts estimate of $.13 per share. The good news is that Facebook was able to increase its revenue year over year up by 38%. The company has reported revenue of $1.46 billion, compared to analysts expecting $1.44 billion. What this data shows is that the company was able to boost the amount of users coming onto the site, and increase mobile revenue. Both SINA, and Renren need to find a way to follow this model to be successful in the long run.
Final Thought
SINA Corp (NASDAQ:SINA) has seen tremendous growth, and I believe that is a good stock to own in your portfolio. Quite honestly, in my opinion, it should be the only name from China that you own. The company has seen a huge investment from Alibaba for Weibo, and Weibo is a more popular platform in China compared to other social media companies. Weibo has 300 million users, and it continues to attract new users over the years. I still believe that this company will grow in the future, but you have to be patient for this company to reach its full potential.
The article This Chinese Company Is Worth Your Attention originally appeared on Fool.com and is written by Terry Chrisomalis.
Terry 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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