SINA Corp. Beats Estimates

For the fourth quarter of 2007, both SINA Corporation's (SINA) revenue and EPS exceeded market consensus. SINA continued to do well in its online brand advertising, and increased the gap between it and its closest competitor in the online brand ad market.

SINA is still one of the most well-known online brands in China. Moreover, the Beijing Olympic Games can significantly stimulate the online advertising business in China in the next several quarters.

For fiscal year 2007, its net revenues increased 16% year-over-year to $246.1 million. Advertising revenues grew 41% year-over-year to $168.9 million. Non-advertising revenues decreased 17% year-over-year to $77.2 million. GAAP net income increased 45% year-over year to $57.7 million. Diluted net income per share was $0.97, compared to $0.69 for fiscal 2006.

The stock is currently trading at 31.1x our estimate for fiscal year 2008 earnings per share, which is slightly lower than the industry mean and higher than that of its closest Chinese competitors. The stock is also trading at 24.1x our estimate for fiscal year 2009 earnings per share, which is lower than the industry mean.

Using a P/E multiple of approximately 28x our fiscal year 2009 earnings per share estimate yields a target price of $50, which we believe reflects the company's current prospects. Therefore, we maintain our Buy rating for SINA. 

Upgrading UTStarcom to Hold

We upgrade our recommendation to a Hold with the same valuation target for UTStarcom (UTSI), a provider of IP telecom and mobile equipment, ahead of fourth quarter 2007 earnings results to be released shortly. We believe the company may be in a position to expand telecom offerings as it controls costs with recently concluded restructuring activities. The company's IPTV and optical transport solutions are also receiving encouraging market traction in South Asia, Asia-Pacific and Latin America.

The completion of financial restatements for historical reporting periods has further improved the company's accounting structure. On the other hand, we do not expect UTStarcom to achieve profitability before 2010. In addition, markets for IPTV solutions are highly competitive which may hinder efforts to improve the company's margin position and earnings power.

UTStarcom is difficult to value on the basis of P/E in view of negative earnings performance. On the basis of enterprise value (EV) to 2008 sales, UTStarcom is trading at 0.04x, which is significantly below the 0.8x peer group average. The company is in the midst of transitioning its focus on the Chinese PAS infrastructure and handset segments to an expansion of its equipment offerings for the global markets.

Although we believe earnings fluctuations will continue over the near-term, ongoing deployments of IPTV networks at numerous carriers worldwide, along with other associated high-speed broadband service requirements, may transcend to overall business visibility improvements for the company. UTStarcom's current valuation, at the low end of 52-week price range, has also become more favorable. We, therefore, upgrade our rating to a Hold with the same six-month target price of $3, based on EV/Sales of 0.05x our fiscal 2008 sales estimates.

Nalak Das contributed to this report.

OSI Pharma Kept a Hold for Now

OSI Pharmaceuticals, Inc. (OSIP) is a biotechnology company engaged in the discovery, development and commercialization of pharmaceutical products for the treatment of oncology, diabetes, and obesity in the U.S. Strong U.S. sales and robust growth in ex-U.S. sales have us modeling over $1 billion in Tarceva sales in 2008 and beyond. We are particularly excited about the revenue from the company's DPP-IV estate.

However, the Eyetech acquisition was a complete failure, and we are pleased to see the company divesting off this business in parts. We expect the divestiture to be completed in 2008.

Positive data from the SATURN trial in mid-2008 coupled with the price increase taken in February 2008 should help drive Tarceva's U.S. sales. Increasing U.S. sales coupled with the impressive growth in the drug's ex-U.S. sales should drive top-line performance in the coming 12 months, while revenue from the DPP-IV patent estate will continue to impact the company's bottom-line positively.