It has proved famously fiddly to put a price on internet stocks like Twitter or Facebook, both privately held companies. But it turns out too that, even for a listed company like Sina, analysts can’t always agree on what the company is worth.
The current challenge with Sina is valuing its microblogging service Sina Weibo (see WiC95). Estimates have ranged from $1 billion up to $5 billion so far, with a few coming in higher still. Anywhere in that range looks pretty good, considering Charles Chao, Sina’s chief executive, told the Shanghai Daily last week that total investment in the microblogging service will reach $100 million by the end of the year, as Sina tries to expand its user base from 140 million to over 200 million.
“We will seek to build up our competitive edge against other service providers and secure our position in the market,” Chao told analysts. For the moment, investment in weibo is hitting Sina’s bottom line. First quarter net income fell 39% year-on-year to $15 million on a 41% jump in operating expenses driven mainly by higher personnel and marketing spending for the microblogging tool.
That hasn’t dampened the investor mood. Sina’s Nasdaq share price has jumped about 250% during the last year.
Sina says it now hopes to build scale to make it harder for its rivals to compete. That’s going to be important as half a dozen other Chinese internet firms are already running similar products, with Tencent and Sohu being the most serious competitors (see WiC101).
“I don’t think anyone would be upset with them spending more money to develop this service of theirs because this is their growth opportunity,” says Paul Wuh, a Hong Kong-based analyst at Samsung Securities.
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