Weibo Corporation

WB Details

Weibo Corporation (NASDAQ: WB) is a social media platform for sharing, producing, and discovering digital content based in China. Customers in the advertising and marketing industries can also use consumers to promote their brands, products, and services. It makes most of its money through advertising and marketing services, such as social display ads and promoted marketing items. It had 573 million monthly active users (MAUs) and 249 million average daily active users (DAUs) as of December 2021. WB has 243.29 million American Depository Shares (ADS) listed and outstanding (each ADS representing one Class A ordinary shares).

Latest News:

• Pricing Global Offering: On December 02, 2021, WB priced its global offering of 11 million Class A ordinary shares of the firm, borne in equal parts by WB and Sina Corporation. WB's global offering consists of a Hong Kong public offering and an international offering for HKD 272.80 per offer share, or USD 35.01 per ADS, based on a ratio of one Class A ordinary share per NASDAQ-Listed ADS.

FY21 Results:

• Surge in Topline: The company reported YoY growth of 33.56% in total revenue to USD 2.26 billion in FY21 (ended December 31, 2021) from USD 1.69 billion in FY20, attributable to YoY growth of 28% in Advertising and marketing segment.
• Expansion in Net Income: Net income for FY21 increased to USD 428.32 million compared to USD 313.36 million in FY20.
• Cash and Debt Position: As of December 30, 2021, the company had cash & cash equivalents (including short term investments) of USD 3.13 billion and total debt of USD 1.54 billion.

Key Risk:

• Regulatory and Political Risk: The Chinese authorities' recent crackdown on its US-listed businesses has significantly impacted Weibo Corporation’s stock price as its shares plummeted from USD 64.65 and tested a bottom of USD 27.30 recently. Further escalation on this front could further have a weigh on the company’s financial.  Also, U.S.-listed Chinese companies are now exposed to a tougher U.S. audit requirements which will likely force many to delist in coming years.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

WB's stock price has fallen 45.78% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 26.47 to USD 64.70. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 33.79.

Considering the significant correction in the stock price, reducing debt, strong profitability margins, current valuation, and associated risks. We recommend a "Buy" rating on the stock at the closing price of USD 27.42, up 2.01% as of March 02, 2022.

Three-Year Technical Price Chart (as on March 02, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer

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