Weibo: How Much Upside Is Left?By Isabella Zhong
Weibo's (WB) shares tumbled 4.8% in New York trading on Wednesday after its spectacular surge the day before.
Despite the dip, Weibo shares have surged 220% over the past year and trade at a grand
44 times forward earnings. But Nomura analyst Jialong Shi argues the stock hasn’t yet peaked. Shi, who rates Weibo a buy, has lifted his target price from $63 a share to $91 a share, which implies 22% upside.
Shi is a fan of Weibo’s video strategy:
Short video has been Weibo’s focus in 2017. It has deepened its cooperation with media and video studios to enhance its PGC video ecosystem. Also, Weibo is exploring the UGC short video market via the launch of Weibo Stories for Weibo users to share their moments on Weibo.
The efforts on its video strategy resulted in over a
500% y-y increase in video views in March. Video ads, representing 18% (up from 10% in 4Q16) of overall ad revenue, are increasingly popular among advertisers, and the number of video ad customers grew 30% q-q in 1Q.
In fact, Weibo has 782k advertisers as of 1Q17, up 14% q-q. Also, management said Weibo might start to share the live broadcasting revenue from Yizhibo in 2H17. We are not so bullish on this revenue stream as the market share of Yizhibo is small vs peers like Momo (MOMO US, Buy) and YY (YY US, Neutral).
Weibo is primed to be a major beneficiary of the shift in Chinese online advertising dollars towards social media, a trend that Barron’s Asia highlighted earlier this year.
Shi notes Weibo has revamped the information feeds on timelines to include interest-based recommendations to users, which could help to improve user engagement stickiness. The analyst expects Weibo to grow earnings at an average 47% annual pace in fiscal 2018 and 2019.
Source: Barron's Asia
http://www.barrons.com/articles/weibo-h ... 1495093643
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