Stock (Symbol) |
Weibo (WB) |
Stock Price |
$27 |
Sector |
| Technology |
Data is as of |
| June 2, 2016 |
Expected to Report |
| Aug 16 – Aug 22 |
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 |
 Investors have pushed shares of Weibo (WB) up from $21 to $29 just since last qtr (+38%). The Twitter of China broke out on high volume then continued to run higher — a rare feat for a stock in the current market. Perhaps this is a sign of good things to come? Weibo was created by Chinese web company Sina in 2009, and was spun off as an IPO in April 2014. Sina still owns around 50% of WB shares, and Weibo advertiser Alibaba holds a stake in WB as well. The profit picture is bright. Profits are growing at a triple-digit rate now and analysts expect them to grow from $0.32 last year to $0.55 this year, $0.93 next year and $1.43 in 2018. The stock sells for 53x earnings now, and 53 x $1.43 = $75. No wonder the stock’s moving higher. But there are high risks with Chinese companies, thus we can’t assume or make big bets on what the projections are. Still, this stock is proving to be a market leader and small caps are now in favor with investors so this stock is timely. There’s big potential with WB, just don’t make it a big position in your portfolio. |
One Year Chart |
 Amazing triple-digit growth (or in one case quadruple-digit). Last Weibo delivered 25% sales growth, profits of $0.07 vs $0.01 a year ago (600%) and beat the street by 3 cents. Afterwards all estimates climbed with the next 4 qtrs profit growth now estimated at 100%, 60%, 53% and 100%. Unfortunately WB still doesn’t have an estimated long-term growth rate. The P/E is 53, which is a bit high but with this kind of growth you can make a case for it. |
Fair Value |
 I’m going to continue to pin my Fair Value at 45x earnings. When I look at WB’s Fair Value that equates to the stock getting a little ahead of itself now but having solid upside next year. 2016 estimates just increased from $0.50 to $0.55, 2017’s from $0.84 to $0.93 and 2018’s from $1.28 to $1.43. If analysts continue to increase estimates then $2 in 2018 isn’t out of the question. A P/E of 50 x $2 in profits would mean a $100 stock, but that’s just pie in the sky at this point. |
Bottom Line |
 Weibo is the model that Twitter should follow as WB seems like a better run company at this point. This stock just broke out of a long basing pattern on the heals of triple-digit growth and WB fits the mold so well it could go on to be a big stock market winner. But there are risks here as this is a small Chinese company, so don’t buy a lot. For now WB ranks 6th in the Growth Portfolio Power Rankings and 3rd in the Aggressive Growth Portfolio Power Rankings. The stock is a little extended here so I would wait for a pullback before buying. |
Power Rankings |
Growth Stock Portfolio
6 of 39Aggressive Growth Portfolio 3 of 16Conservative Stock Portfolio N/A |
