Weibo Has Limited Upside, Goldman Says Amid Downgrade

Following the recent 90 percent rally in the share price, Goldman Sachs’ Piyush Mubayi believes that Weibo Corp (ADR) WB shares have limited upside, despite the robust 1Q results.

Mubayi downgraded the rating on the company from Buy to Neutral, while raising the price target from $20 to $22.

Strong Performance

“Weibo has consistently delivered robust user/ SME ad revenue growth over the past few quarters, enhancing its position as a leading open social network in China esp. in ‘Fans economy,’” the analyst mentioned.

The company reported its 1Q results above expectations, with net revenues growing 24 percent year on year to $119 million, ahead of the guidance.

Non-GAAP EPS also came in above the estimates and consensus, while the company guided to 28-33 percent year on year revenue growth for 2Q16, in-line with the prior expectations.

Robust Metrics

Weibo’s MAU and DAU for March 2016 witnessed 32 percent and 35 percent year on year growth, respectively, “with DAU growth the highest since the April 2014 IPO,” Mubayi said.

With 50 percent penetration in tier 1 cities, management expects to see further upside from the lower tier cities, which are only 20-30 percent penetrated at present.

SME ad revenue rose 136 percent year on year in 1Q16, with robust Key Accounts ad revenue being offset by a decline in ad revenue from Alibaba Group Holding Ltd BABA.

Daily video views also saw robust growth, at 489 percent year on year.