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Weibo (WB US) Summary

Core Content

Weibo (WB US) is a Chinese social media platform that has experienced revenue and earnings challenges in 4Q22E due to tighter regulations on entertainment content and the resurgence of COVID-19 in December 2022. These factors led to a decline in ad promotions and user engagement, which impacted the company's financial performance. However, the outlook for the company has improved with the recovery of the Chinese economy and the reopening after the Chinese New Year, leading to a forecast revision and an updated target price.

Main Points

• Revenue Forecast:

  • Weibo's total revenue for 4Q22E is forecasted to decline by 28% YoY and 2% QoQ to US$445mn.
  • For FY23E and FY24E, the company is expected to see a 5% YoY and 5% YoY revenue growth, respectively.
  • Revenue is projected to grow at 6% YoY and 5% YoY on a constant currency basis.

• Non-GAAP Net Income:

  • Non-GAAP net income for 4Q22E is expected to decline by 37% YoY to US$123mn.
  • For FY23E and FY24E, non-GAAP net income is forecasted to grow by 13% YoY and 7% YoY, respectively.

• Margin Improvements:

  • Gross margin is expected to improve slightly from 78.8% in FY22E to 79.0% in FY23E and 79.0% in FY24E.
  • Non-GAAP operating margin is forecasted to rise from 30.8% in FY22E to 31.0% in FY23E and 31.3% in FY24E.

• Target Price and Valuation:

  • The target price for Weibo is raised to US$27.8, based on a 12x FY23E PE, up from US$20.3 based on a 9x FY23E PE.
  • The current price is US$23.73, and the target price implies a 17.2% upside.
  • The company currently trades at 10x FY23E non-GAAP PE, which is 57% below the sector average.

• Earnings Growth:

  • The adjusted EPS for FY23E is forecasted at US$2.39, with a 3.1% YoY growth.
  • The consensus EPS for FY23E is US$2.23, indicating the potential for outperformance.

Key Financial Forecasts

Peer Valuation Comparison

Shareholding Structure

• Sina: 40.1%
• Alibaba: 28.7%

Stock Performance

Analyst Recommendation

• Maintain BUY.
• The stock is seen as offering an attractive risk-reward ratio with a 0.8x FY23E PEG and a 57% discount to the sector average PE.
• The recovery in consumption sentiment is expected to be a key catalyst for further re-rating.

CMBIGM Ratings

• BUY: Stock with potential return of over 15% over the next 12 months.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark over the next 12 months.

Analyst Certification

• The analyst certifies that the views expressed in the report reflect his or her personal views and that no compensation is directly or indirectly related to the report's content.
• The analyst confirms that no trading or dealing in the stock covered in the report occurred within 30 days prior to the report's release and will not occur within 3 business days after the release.

Important Disclosures

• The report is intended for distribution to major US institutional investors only.
• CMBIGM is not a registered broker-dealer in the US and is not subject to U.S. rules regarding research reports.
• The report is not an offer or solicitation to buy or sell any security.
• The information is based on publicly available data and is not guaranteed for accuracy or completeness.