Weibo Corporation

WB Details

Weibo Corporation (NASDAQ: WB) is a social media network founded in China that allows users to share, create, and discover digital content. 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 marketing items. As of September 2021, it had 573 million monthly active users (MAUs) and 248 million average daily active users (DAUs). WB has 243.29 million American Depository Shares (ADS) listed and outstanding, with each ADS representing one Class A ordinary share.

Latest News:

• Global Offering: WB priced its global offering of 11 million Class A ordinary shares of the firm, borne in equal proportions by WB and Sina Corporation, on December 02, 2021. 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 Class A ordinary share ratio per NASDAQ-Listed ADS.

Q3FY21 Results:

• Rise in Revenues: Total revenue increased by 30.42% YoY in Q3FY21 (ended September 30, 2021) to USD 607.43 million, up from USD 465.74 million in Q3FY20, driven by growth in both segments.
• Growth in Net Income: In Q3FY21, net income climbed to USD 181.74 million, up from USD 33.80 million in Q3FY20.
• Strong Balance Sheet: The company has USD 2.71 billion in cash and cash equivalents (including short-term investments) as of September 30, 2021, and USD 2.43 billion in total debt (including unsecured senior notes).

Key Risks:

• Regulatory and Political Risk: The Chinese authorities' crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent the company's operations. After the passage of a bill in the US, this could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Outlook:

• Q4FY21 Guidance: In Q4FY21, WB forecasts YoY growth of 15% to 20% in constant currency.

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 NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

WB Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

WB's share price has declined 44.58% in the past six months and is currently leaning towards the lower-band of the 52-week range of USD 27.30 to USD 64.70. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 50.80. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 40.08.

Considering the correction in the stock price in the past six months, strong profitability margins, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 33.41, up 0.94% as of January 14, 2022, at 2:26 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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