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Weibo Continues to Deliver Stellar Results

Stock (Symbol)

Weibo (WB)

Stock Price

$45

Sector
Technology
Data is as of
January 7, 2017
Expected to Report
Feb 28 – Mar 6
Company Description
weibo_logoWeibo 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
David SharekShares of Weibo (WB) doubled in price last year, but does the stock have anything left for 2017? I say yes it does. Weibo, which is referred to as the Twitter of China, was created by Chinese web company Sina in 2009, then spun off as an IPO in April 2014. Sina still owns a large portion of WB shares, as does Alibaba, which is a key advertiser for Weibo. WB’s profits have been growing at a breathtaking pace, and that looks to continue well into 2017. What’s even more important is profit estimates continue to surge, which is a key element of top-tier growth stocks. During the last 4 qtr’s 2016’s profit estimates have risen from $0.50 to 0.55, 0.68 and $0.76 with a qtr to go in the year. 2017’s have gone from $0.84 to 0.93, 1.12 and $1.26 during the same period, and if that trend were to continue the company would make $2 this year. Then it’s a question of valuation. 40 times $2 would mean a $80 stock, 60 x $2 = $120. Along the way we would inch closer to 2018, in which case profit estimates have surged from $1.28 to $1.82 in the last year — and we are still more than two years away from 2018 being in the books! What if WB makes $3 in 2018 and gets a $50 P/E? Management is executing well as sales grew 42% last qtr yet expenses rose just 21%. Creation and consumption of short videos is a top priority for management this year, and the company is working on making it more convenient for users to create videos and perform live streaming. Weibo just began running video ads during the Summer of 2016, and there’s vast opportunity here as these make up just 10% of sales. Daily video views increased 740% in September. WB has an Est. LTG of 83% per year — the highest in my universe — yet sells for just 36x earnings. My 2017 Fair Value is $76.
One Year Chart
Total revenue grew 42% last qtr, as profits surged 140%. Three qtrs ago that profit growth estimate was 50%, then estimates increased and WB beat the street in the end. Raise and beat is a key attribute of superstar stocks. Monthly active user rose 34% year-over-year and key advertisers grew 46% as revenue from key advertisers increased 119%. Qtrly profit Estimates are 87%, 171%, 75% and 42% and these estimates have increased since last qtr. The Est. LTG of 83% is fantastic, and I’m very surprised the P/E is just 36. The P/E was 72 last qtr. In the end, WB had to digest its gains made during the first half of 2016. Now the stock seems ready to roll once again.
Fair Value
With superior fundamentals, this stock is worth 60x earnings in my opinion. That equates to a $76 stock this year and $109 in 2018.
Bottom Line
Weibo stock doubled last year, but I feel the move was much deserved as 2016 profits are expected to double as well. Looking out to 2017, profit growth is expected to be 66% but since these figures have been increasing, perhaps profits could double once again. In the end, when I analyze all the numbers, Weibo looks to be a top-tier growth stock. But be cautious as Chinese stocks can have volatile swings, and my top Chinese stocks of today are different from the ones I rode with three years ago. WB ranks 10th in the Growth Portfolio Power Rankings and Aggressive Growth Portfolio Power Rankings.
Power Rankings
Growth Stock Portfolio

10 of 34

Aggressive Growth Portfolio

10 of 18

Conservative Stock Portfolio

N/A

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