Stock (Symbol) |
Weibo (WB) |
Stock Price |
$21 |
Sector |
| Technology |
Data is as of |
| April 8, 2016 |
Expected to Report |
| 5/12 – 5/16 |
Company Description |
 Weibo Corporation is a social media platform for people to create, distribute and discover Chinese-language content. The Company provides ways for people and organizations to publicly express themselves in real time, interact with others on a global platform and stay connected with the world. It operates in two segments: advertising and marketing services and other services. It offers self-expression products that enable its users to express themselves on its platform; social products to promote social interaction between users on its platform; discovery products to help users discover content on its platform, and notifications to notify users on Weibo account activities through short message service (SMS) or push notification on their device. It offers advertising and marketing solutions to enable its customers to promote their brands and conduct marketing activities. Source: Thomson Financial |
Sharek’s Take |
 Weibo (WB), the Twitter of China, is breaking out this week on high volume. Weibo was created by Chinese web company Sina in 2009, and was spun off as an IPO in April 2014 (it just turned two, awe). Sina still owns around 50% of WB shares. China’s Internet use is growing, and Weibo is taking in online ad dollars from customers including Alibaba. Weibo had 42% sales growth last qtr, and turned that into 275% profit growth (nice). Sales growth is expected to slow to 18% this qtr, but WB beat revenue estimates last qtr so we’ll see. WB presented at the Credit Suisse 19th Annual Asian Investment Conference this week as it has been accumulated on high volume. The stock sells for 42x earnings, and is expected to grow profits 300%, 80%, 50% and 47% the next 4 qtrs, thus I feel the valuation is fair. Annual profits are expected to climb from $0.32 last year to $0.50 this year, $0.84 in 2017 and $1.28 in 2018 — that’s rapid growth. If WB does make $0.84 and gets a 42 P/E next year the stock would be $35. I will purchase WB for the Growth Portfolio and Aggressive Growth Portfolio. |
One Year Chart |
 Last qtr WB delivered 275% profit growth on a 42% increase in sales. It beat the $0.13 estimate by 2 cents, and has beaten the street the last three qtrs. Looking ahead, qtrly estimates of 300%, 80%, 50% and 47% look very good. The company doesn’t have an Estimated Long Term Growth Rate…yet. |
Fair Value |
 So what’s Weibo worth? Well the stock’s at 42x earnings today, so that’s a good start. My guess is the stock is worth anywhere between 20x and 45x earnings. The kicker is 2017 profits are expected to climb 68% to $0.84. My thought is if the stock makes $0.84 (no clue as to if it will) and gets a 25 P/E then it will be $21 next year. If it makes that and gets a 42 P/E it will be a $35 stock, 70% higher than today. |
Bottom Line |
 Weibo is the Twitter of China, and is in a sweet spot where Chinese advertisers like Alibaba are spending. The stock is breaking out this week on high volume after a long basing period, and that’s a signal to buy. I will add WB to the Aggressive Growth Portfolio and Growth Portfolio where it will rank 13th in each portfolio’s Power Rankings. Although the fundamentals here look solid, there is added risk with this stock as it is a Chinese company, so don’t take a big position. Palo Alto Networks (PANW) will be sold in the Aggressive Growth Portfolio to create cash to buy WB. |
Power Rankings |
Growth Stock Portfolio
13 of 34Aggressive Growth Portfolio 13 of 16Conservative Stock Portfolio N/A |
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