- Stock cut to hold from buy on web business transition issues
- Full privatization shouldn’t be expected despite cash balance
Sina Corp. dropped to the lowest level since May in New York trading after Deutsche Bank AG downgraded its rating on the stock to hold on concern the Chinese Internet company’s web portal business will be hurt as advertisers shift to mobile platforms.
The stock slid 6.3 percent to a six-week low of $42.22 on Wednesday after Deutsche Bank reduced it from buy. A Bloomberg gauge of the most-traded Chinese companies trading in the U.S. fell 3.3 percent in the largest slump in a week, while the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF sank for a third day.
Sina, which owns a web portal and the Twitter-like Weibo platform, surged almost 50 percent in the first two weeks of last month to a one-year high after its chief executive officer agreed to buy $456 million of new shares and as an equity rally in China’s domestic market lifted valuations of overseas-listed Internet companies. Advertisers are shifting away from Sina’s website and the company has struggled to build a profitable mobile business, Deutsche Bank analysts led by Vivian Hao said in a note Wednesday.
“The company is working on energizing its portal business but so far we haven’t seen anything change,” Henry Guo, a San Fransisco-based analyst at Summit Research Partners, said by phone. “Weibo is still struggling with monetization. This recent stress on Sina shares is about all kinds of speculations in the market.”
Guo also has a hold rating on Sina and says the current valuation is reasonable. The stock traded at 41 times forward earnings, a three-month low, after the multiple soared to 62 last month.
A record 26 U.S.-traded Chinese companies have received proposals this year to buy out shareholders for potential re-listings in the nation’s domestic market, according to data compiled by Bloomberg. Qihoo 360 Technology Co., owner of China’s second-largest web search engine, got a $8.2 billion takeover offer from investors including its chairman.
Investors shouldn’t expect Sina to go private, according to the Deutsche Bank note. While the CEO’s increased holdings showed his commitment, it “doesn’t imply further upside” to the stock, the analysts wrote.
Weibo tumbled 5.9 percent to $14.06, erasing its gain for the year. The Deutsche X-trackers A-Shares ETF plunged 4.3 percent to $40.24 in New York after China’s better-than-expected economic data for the second quarter failed to boost the Shanghai Composite Index, which slid 3 percent. The iShares China Large-Cap ETF tracking Hong Kong shares fell 2.3 percent to $41.73, slumping the most in a week.