Weibo Corporation

Weibo Corporation (NASDAQ: WB) is a Chinese social media platform for sharing, producing, and discovering digital content. Customers can also use consumers in the advertising and marketing industries to promote their brands, products, and services. Most of its revenue is generated by advertising and marketing services such as social display ads and advertised 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).

Why Should Investors Book Profit?

• Decline in Liquidity Profile: The company's current ratio at the end of FY21 is 2.22x, compared to 5.04x in FY20. This implies relatively lackluster liquidity profile during the current fiscal..
• Leveraged Balance Sheet: The company is more exposed to balance sheet risk than its peers, with a Debt/Equity ratio of 0.68x as of December 31, 2021, compared to the industry norm of 0.27x. Furthermore, its long-term debt-to-total-capital ratio was 25.1%, compared to the industry average of 18.0% for the same period. These leveraged financials put the corporation at risk of huge swings due to the slightest adjustment in interest rates.

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.

Stock Recommendation:

WB's share price has inclined 46.67% in the past nine months and is currently leaning towards the lower band of the 52-week range of USD 18.62 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 21.69.

Considering the company's leveraged balance sheet, weak liquidity profile, current valuation and associated risks. we recommend a "Sell" rating on the stock at the closing price of USD 25.81, up 4.57% as of March 31, 2022, at 06:32 AM PDT.            

Technical Price Chart (March 31, 2022, 09:32 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

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

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