Shares of SINA and Renren Spike Despite Reporting Losses
NEW YORK, NY--(Marketwire -05/18/12)- China's internet stocks have posted mixed results recently as government restrictions, high costs, and a shift to mobile devices have made it difficult for companies to tap into the nation's vast online market. It is estimated that only 37.7 percent of China is online according to the China Internet Network Information Center (CINIC). Five Star Equities examines the outlook for companies in China's Internet Sector and provides equity research on SINA Corporation (SINA) and Renren Inc. (RENN).
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China currently has more than 500 million internet users. China's internet growth has lagged in recent years, 55.8 million users were still added in 2011, according to the CINIC. Estimates from eMarketer, a digital-marketing research firm, projects that online advertising revenue is projected to grow from $4.6 billion in 2011 to $9.5 billion in 2014. With tight restrictions from the government and growing competition, internet companies have struggled to turn users into reliable sources of revenue.
"A lot of these problems are coming from the fact that most of these firms are still figuring out what the ultimate business model is going to be," said David Wolf, chief executive of Wolf Group Asia. In regards to slowing internet user growth, he added, "It will be about who has the deeper pockets and who is going to be able to evolve their service to keep users. We are looking at more spending before we see more revenue."
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SINA Corporation, a leading online media company serving China and the global Chinese communities, earlier this week announced its unaudited financial results for the first quarter ended March 31, 2012. Despite reporting a net loss for the first quarter of 2012 of $13.7 million, compared to a net income of $15 million for first quarter 2011, shares of the company jumped over 11 percent Wednesday.
Renren operates the leading real name social networking internet platform in China. It enables users to connect and communicate with each other, share information and user generated content, play online games, listen to music, shop for deals and enjoy a wide range of other features and services. The company recently reported an operating loss of $20.6 million for first quarter 2012, compared to a loss of $4.7 million in first quarter 2011.
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Shares of SINA and Renren Spike Despite Reporting Losses