NEW YORK (
(SINA - Get Report)
, operator of China's popular Weibo micro-blogging site, remains a work in progress yet a company with enough of a foothold in the country's social media market to warrant patient investors, said
analyst Echo He.
Maxim's He, who has long rated Sina a "sell," upped her rating in the shares to "hold" on Friday, citing the potential for revenue growth at the company's social media platform most frequently identified as China's version of Twitter.
Yet not all is go-go growth at Sina, says He. Weibo is certainly popular but traffic has begun to mature, a fancy way of saying it's not growing. It's hit a plateau. He referred to Weibo's current predicament as suffering from "stale" traffic growth.
"Traffic is one of the risks there," the New York-based analyst said over the phone. "If I have a 'hold,' there's got to be something I'm concerned about so at the end of the day, traffic is what I'm concerned about."
Sina was dropping 1.5% to $55.74 in afternoon trading.
But He also pointed out that on the flipside, Weibo, launched in 2009, is still a relatively young business that has just started to really grow revenue. So as long as they can keep user activity going and find new and compelling products to add to the service, its revenue upside should remain promising.
"Its revenue side is far away from mature," said He.
The Maxim equity analyst explained that her optimism about Weibo's revenue growth was bolstered by the Alibaba deal struck in late April with Sina to invest $586 million for 18% of Weibo's equity. The companies predict that their collaboration could yield about $380 million in advertising and commercial revenue for Weibo over the next three years.
With Alibaba's involvement, He estimates that Weibo's ad revenue could grow by 91% to $261 million or 33% of revenue in 2014 and by 52% to $396 million or 40% total revenue in 2015 from a year ago. She's modeling $137 million in ad revenue generation from Weibo this year, with 10% to 15% of that attributable to the Alibaba collaboration.
Written by Andrea Tse in New York
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