Not vested in WB; Vested in SINA.
Chinese Stocks to Buy: Weibo (WB)
Why It Is Dropping: Red-hot Chinese social media company Weibo (NASDAQ:WB) reported robust first-quarter numbers a few months back. But, the guide wasn’t all that strong (it was simply in-line with estimates as opposed to above estimates). Ever since then, WB stock has dropped from $130 to $80, a 40% cut to valuation that simply doesn’t add up.
Why It Will Rebound: Of all the companies on this list, Weibo is the fastest growing. The user base is growing at a 25%-plus clip. Revenues are growing by 70%-plus. Profits are more than doubling year-over-year.
Yet, WB stock is trading at just 30x forward earnings, which seems anemic next to 70%-plus revenue growth and even more anemic next to 100%-plus profit growth. Moreover, at just 411 million monthly active users and adding 70 million new users year-over-year, Weibo has a clear and long runway ahead of it with respect to user growth (For example, Tencent’s (OTCMKTS:TCEHY) WeChat has more than 1 billion users).
Overall, WB stock is simply way too cheap here considering its massive, multi-year growth prospects in China’s red-hot internet market. The valuation will inevitably normalize as sentiment in the Chinese tech sector rebounds.
Source: Investor Place