Why It Might Be Time To Buy Weibo: Summit Research

• Shares of Weibo Corp. (ADR) WB have declined more than 43 percent over the past year.
• Henry Guo of Summit Research has upgraded the rating on Weibo from Hold to Buy, with a price target of $14.
• Following the company’s 2Q15 earnings results and the recent market correction, Guo believes that the weakness in Weibo’s share price offers an attractive buying opportunity.

“We become incrementally positive on WB shares as we see encouraging user engagement trend, promising monetization progress, high visibility to long-term profitability due to balanced growth/investment strategy, and compelling valuation,” analyst Henry Guo explained.

User engagement on the Weibo platform has improved, driven by the gradual enhancement of user experience, associated with information discovery and consumption. Guo believes that the company has strengthened its position as the leading online social platform in China, where users can follow and discuss social events and breaking news.

The average number of videos viewed daily grew by almost 400 percent in June 2015, as compared to the level six months ago, with monthly active users reaching 212 million during the month, representing a 36 percent rise from the previous year’s level.

“SME advertising customers continue to embrace Weibo as a channel to increase visibility and exposure,” according to the Summit Research report, with the number of SME customers rising 14 percent quarter-on-quarter for the June quarter.

Guo believes this increase was driven by Weibo’s efforts to improve its self-service offerings and “optimize the SME ads distribution channel.”

“Additionally, we have noted increasing event-driven campaigns on Weibo platform, which we believe should add incremental ad revenue for Weibo, through what Weibo called “Big Day Package,” Guo added.