Weibo (WB): Chinese Messaging Platform that Mimics Twitter

It’s fun to read about your sports teams when they win, and I think it’s great to read about growth stocks when they score big. Reading about success stories can inspire you, teach you what to look for and give you the confidence you need to start looking for one of your own.

My success story today is Weibo (WB), a Chinese instant messaging platform that mimics Twitter in almost all regards, enabling attachments of pictures, videos, links and other content while limiting the length of texts. Despite the limit on characters, Weibo functions much more like Facebook because Chinese characters are more like words than letters, so a Weibo post could be the equivalent of 80 words. (And if the company follows Twitter in raising its character limit, a Weibo post could turn into a small essay.)

Weibo was inaugurated as a service of the Chinese web portal Sina.com in 2010 and spun off in 2014, with Sina keeping a majority stake. Weibo’s monthly active user (MAU) roster now has 376 million accounts, up 79 million from Q3 2016, with mobile device users representing 92% of MAUs. The daily active user count hit 165 million in September, an increase of 33 million from the same period in 2016.

The company’s Q3 earnings report on November 7 headlined an 81% jump in revenue (after growth of 72% in Q2 and 67% in Q1), with earnings up 113%. That’s the 12th consecutive quarter with triple digit earnings growth for Weibo. After-tax profit margins were a healthy 36%. The company has $737 million in cash and cash equivalents.

Weibo makes most of its money by selling advertising and marketing opportunities to customers seeking access to its user base. Given the enthusiasm Chinese consumers have shown in taking to e-commerce, it should be a growing market.

There are risks associated with Weibo, of course. The Chinese government holds all Chinese online entities responsible for the content posted by users. And while Weibo uses both automated and human screening of content, violations of the rules can result in significant sanctions, like temporary service shutdowns. And eventually, growth will have to slow down as the Chinese social media market approaches saturation.

But the real bottom line for Weibo shows up in the chart for its stock, WB. Any stock that can deliver a ten-bagger in less than two years is bound for the Hall of Fame, and that’s exactly what WB did, soaring from 12 in February 2016 to 123 at its peak last month. Here’s what the weekly chart looks like.

Like many Chinese stocks (also many U.S. growth stocks), WB has corrected significantly since its high at 123 on November 21. Now trading at 98, WB is back to its August price level.

But as you can see from the chart, the stock has had plenty of pullbacks and flat patches on its long run, so it’s a fairly safe bet that the stock is taking a breather, not dropping out of the race entirely.

I’ve advised my subscribers to Cabot Global Stocks Explorer to buy WB several times during the last two years, jumping in when things were going well and getting shaken out during corrections.

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Weibo (WB): One Revolutionary Stock

The company on my mind today is Weibo (WB), the leading social media company in China. You might call it the Twitter of China, but it also has similarities to Facebook.

Weibo is big, but growing both revenues and earnings rapidly and thus its future is very bright. Also, because few U.S. investors know about the company, there are still way more potential buyers than sellers.

Weibo (WB) was one of the recommended stocks in Cabot Top Ten Trader just a week ago. Here’s what head analyst Mike Cintolo wrote:

“Weibo operates China’s most popular social media platform, a short message service that resembles Twitter in its 240-character limit on posts, but differs because 240 Chinese characters can carry a ton more information than English letters. Weibo continues to reap the benefits of the rise of mobile devices in China as the dominant way for Chinese netizens to access the internet. Weibo’s advertising and marketing programs (which yielded 87% of 2016 revenue) have contributed to some great numbers, including 67% revenue growth in Q1 and 725 in Q2, and earnings that booked an 11th consecutive quarters of triple digit growth in Q2 2017. Analysts are looking for 99% earnings growth in 2017 and 56% growth in 2018. Like Facebook, Weibo is an active partner to its advertisers and marketers, offering a full menu of analytics and promotion assistance.”

As to the stock, it hit a high of 108 in early September and has corrected moderately since, though it hasn’t quite met with its 50-day moving average yet.

You could buy Weibo here, and you might do very well, but a better idea would be to become a regular reader of Cabot Top Ten Trader, so you get the full story, including suggested buying ranges and stops.

Full details here.

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Best Emerging Market Stocks: Weibo (WB)

This is the first in my series of the five best emerging market stocks right now—stocks that I think present excellent opportunities for growth investors. And in a shameless bid to interest home-focused U.S. investors, I’m going to contrast each one with a well-known U.S. company.

Facebook (FB), the social media company that devoured the world, has been a huge favorite with growth investors and part of the FAANG strategy (Facebook, Amazon, Apple, Netflix and Google) that has delivered a substantial chunk of tech stock investors’ returns in 2017.

Facebook has a monster market cap ($367 billion), 1.3 billion daily active users (DAU) as of the company’s latest quarterly report and over 1.9 billion monthly active users (MAU). The company gets revenue of over $30 billion per year and made a sterling 38.1% after-tax profit margin in Q1. Earnings growth is expected to reach 39% in 2017 and 24% in 2018.

While it’s hard to argue with a stock that has gone from 117 at the beginning of the year to 155 in recent trading, there are a couple of red flags. First, there’s the old adage that trees do not grow to the sky, which warns that everything, including a great stock, must eventually top out. Then there’s the company’s roster of institutional investors, which now boasts over 3,000 supporters, raising the question of who’s left to do any buying?

Personally, I doubt that FB is finished. The story remains huge and the company has $29.5 billion in cash and short-term investments to finance any initiatives, joint ventures or acquisitions it wants. And that Zuckerberg kid seems to have a good head on his shoulders.

Like Facebook (FB)? Consider Weibo (WB)!

But if you already own all the FB you want, or if you’re on the lookout for a less-well-known candidate in the social media patch, I think you should consider Weibo (WB), the Chinese social networking platform that’s letting Chinese-language users connect and express themselves. Since Facebook and Twitter (TWTR) are banned from China, Weibo has the entire Chinese market all to itself!

It’s a substantial company, with a market cap of $15 billion and boasts 340 million MAU in its Q1 earnings report in March (which represented 30% year-over-year growth) and 154 million DAU (up 28%). That MAU figure actually puts Weibo ahead of Twitter in MAU.

Revenue growth in that Q1 report was 67%, while earnings growth was a healthy 271%, which represented the 10th straight quarter of triple-digit EPS growth. Analyses predict that earnings will grow by 84% in 2017 and 54% in 2018. As of March, the company had cash and cash equivalents stood at $444 million.

Investors used to call WB the Twitter of China because it follows the same 140-character limit as the U.S. short-message site. But because 140 Chinese characters can convey way more information than 140 English letters, the site’s function is much closer to Facebook.

Why It’s One of the Best Emerging Market Stocks

One look at the daily chart for WB will tell you that the stock has stubbed its toe in some way, as the price has declined from a high of 82 in May to the high 60s in recent trading. The decline was set off by a warning from the Chinese government, which chided Weibo for failure to adequately police the content being posted on its site. (The responsibility for reviewing and controlling content falls to the media company, not the government.) Weibo’s failure to conform to government guidelines caused the warnings from the government, which, in turn, chilled investors on the stock.

But even with the regulatory slap on the wrist, WB is still trading at 69, well up from the 42 where it started the year. And the stock has been showing signs of pulling out of its correction, following its rising 50-day moving average higher over the last six trading sessions.

Run-ins with government regulators are painful, but they’re also par for the course in China and the damage is usually only temporary. Weibo will hire more reviewers to keep an eye on content and all will be forgiven. And in the meantime, you have a chance to buy WB near the bottom of an eight-week correction.

Weibo enjoys the protection that China affords it from competition by Twitter and Facebook. And its revenue and earnings growth is much more robust than Facebook’s. Plus, with only 295 institutional investors on board, the potential for future buying by the whales is enormous.

So, if you like FB, I’d say there are plenty of good reasons to add a little WB to your portfolio. This is the kind of stock that subscribers to Cabot Global Stocks Explorer have been discovering for subscribers for well over a decade.

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Weibo (WB): A favorite stock

One of my favorite stocks in the portfolio of Cabot Global Stocks Explorer (formerly Cabot Emerging Markets Investor) is Weibo (WB). This Chinese company runs the most popular Chinese social media platform. And the success of its service—kind of a cross between Twitter and Facebook—has brought the company so much cash that it has been shopping for rivals, investing in allies and diversifying via joint ventures with all kinds of Chinese online players.

I recommended the stock to my subscribers in April, when WB was trading at 21. With the stock now trading over 48, we’ve taken profits in one-third of our position and we’re holding the rest. But WB doesn’t seem to be interested in slowing down.

Here’s what Mike Cintolo said about the stock when he wrote it up for Cabot Top Ten Trader a couple of weeks after I featured it in Cabot Global Stocks Explorer. (The company did quite well in the upcoming quarterly report that Mike mentioned, but hasn’t yet seen more investment from Alibaba.)

But first, take a look at the stock’s chart to keep in mind as you read. I think it’s exactly the kind of thing that makes it fun to go back to school.

Weibo (WB) from Cabot Top Ten Trader, April 18, 2016:

“In 2009, Sina.com, one of China’s most-popular web portals, came up with its own answer to Twitter and Facebook and called it Weibo. In some ways, it was a standard social media platform that let users create and post their own content, play games (including opportunities for in-game purchases) and access news and weather services. Weibo was a huge hit, and Sina.com spun it off as a separate business in 2014, while retaining a majority stake. Chinese daily active users now number 106 million, while monthly active users hit 236 million in Q4 (up 34% year-over-year), with 83% connecting via mobile devices.

“Like Facebook, Weibo gets its revenue from selling ads, and revenue grew by 43% in 2015. That’s off from growth in previous years, but still huge, indicating that advertisers are hungry for ways to reach Chinese consumers. Weibo has turned a financial corner, booking its first profitable year in 2015, and earnings are forecast to grow 56% in 2016 and 68% in 2017. The other reason for the strength of Weibo’s stock is that rumors are swirling that Alibaba, the Chinese online giant, is ready to increase its ownership stake. If true, the tie-up would increase access to Alibaba’s even larger user base, which could provide a huge boost to revenues. Analysts expect Weibo to report an 18% jump in revenue when Q1 results come out (no set date yet), and that earnings will come in at four cents per share, up from a one cent profit in Q4 2014.”

To receive further updates on WB and other strong momentum stocks, consider taking a trial subscription to Cabot Top Ten Trader. Each week, the advisory features 10 fast-growing momentum stocks. Since January 1, the advisory delivered 235 winning trades!

Weibo (WB): A Chinese mixture of Facebook and Twitter

By Paul Goodwin, Chief Analyst, Cabot Global Stocks Explorer
From Cabot Wealth Advisory 7/5/16 Sign up for Cabot Wealth Advisory—it’s free!

My stock pick today is a Chinese stock that appeared in Cabot Top Ten Trader on June 20. I also have it in the portfolio of Cabot Global Stocks Explorer, the advisory that I write. It’s a social networking platform that’s a mixture of Facebook and Twitter, and it’s been enjoying phenomenal earnings growth. The stock has also been acting well despite the challenges the market has presented.

Here’s an excerpt from Mike’s write-up in the June 20 issue of Cabot Top Ten Trader.

Weibo (WB) is a social networking platform that can be called the Twitter and Facebook of China all wrapped into one. Weibo was launched in 2010 as a messaging service of the Chinese Web portal Sina.com (which still owns a majority of its stock), but was spun off in 2014. Weibo’s user base has grown rapidly; at the end of 2012, the company had 97 million monthly active users (MAUs), which increased to 129 million in 2013 and 176 million in 2014. And when Weibo reported its Q1 results, daily active users had reached 120 million for the month of March, with more than 90% of users accessing the service via mobile devices. The company makes money by offering advertising and marketing opportunities aimed at users, and revenue grew 43% in 2015 and 24% in Q1. Weibo turned profitable in 2015, and has reported six quarters of EPS growth over 100%, including a 600% leap in Q1 2016. Weibo is one of a cluster of Chinese companies (including Baidu, Alibaba and Tencent Holdings) that are thriving as more and more Chinese access the internet—and make purchases—on mobile devices. Like Facebook, Weibo’s popularity is a self-reinforcing trend; the more people become users, the more others want to join. Weibo is a definite Chinese success story, and analysts project that EPS will grow by 72% in 2016 and 69% in 2017.

WB came public in April 2014 at 17, and settled into a trading range centered on 20, with a couple of spikes into the higher 20s. But the stock corrected strongly in late 2014 and again in July and August 2015, with each correction followed by a run back to 21. The stock finally got past that stubborn resistance at 21 in April, running all the way to 29 in early June. The stock’s rising 25-day moving average is just below 26, and should provide support. WB is volatile, but a buy on minor weakness with a relatively loose stop should work out.”

Click here for more information on Cabot Top Ten Trader.


Weibo (WB): The Twitter of China

By Paul Goodwin, Chief Analyst, Cabot Global Stocks Explorer
From Cabot Wealth Advisory 3/29/16 Sign up for Cabot Wealth Advisory—it’s free!

My stock pick today is Weibo (WB), a Chinese company that’s called “the Twitter of China.” Weibo was spun off from Sina.com, a popular Chinese Web portal that still holds a majority of its stock. (Alibaba also owns an 18% stake.)

Weibo is like Twitter in being a social medium for sharing news, messages, gossip and links to everything else.

But it’s unlike Twitter because 120 Chinese characters can communicate a ton more information than 120 Western characters.

Weibo has always been popular, but what has investors taking notice is the successful monetization of its huge user base of 222 million monthly active users. When Weibo reported Q4 earnings on March 2, earnings were up 275% and revenue up 42% and the company’s after-tax profit margin was a record 22.1%.

WB is trading around 18, which is essentially right where the stock came public back in 2014. WB has traded as high as 26 in its short life, and as low as 9, during the August 2015 free-fall, and 12 just last month.

WB remains on the list of past holdings for Cabot Global Stocks Explorer, as we got shaken out during the February retreat. We’re always ready to get out of positions when the market (and a stock’s chart) turns against us. That’s part of how we can take on the risk inherent in emerging markets.

But we still love the story and appreciate the stock’s rebound from its February low.

If you’d like to know when to get back into WB, a click on this link will bring you a no-risk trial subscription to my Cabot Global Stocks Explorer, and the full story on how emerging markets in general (and China in particular) are performing. And when WB is ready, I’ll tell you. Click here for more information.

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