On Friday, Citi revised its price target for Weibo Corp (NASDAQ:WB) shares, lowering it to $13 from the previous $15, while continuing to recommend a Buy rating on the stock.
The adjustment comes after Weibo's first-quarter results for 2024, which showed a year-over-year revenue decline of 4% to $395.5 million and a similar drop in non-GAAP net profit to RMB 106.6 million.
The company's profit margins remained at 27%, thanks to reduced operating expenses that helped to partially counterbalance increased costs of goods sold (COGS).
Weibo's management has expressed a cautious stance regarding the outlook for the second quarter of 2024 but anticipates a stronger growth rate in the second half of the year compared to the first half.
This expectation is based on a lower comparative base from the previous year and the forecasted increase in advertising demand related to the Olympics.
For the second quarter, the company predicts advertising revenue growth will be led by sectors such as apparel and shoes, food and beverage, and online gaming. However, electronics and automobile sectors are expected to see slower growth, with cosmetics projected to experience a downturn.
Citi's revised price target of $13 is based on a multiple of 6 times the estimated compound annual growth rate (CAGR) of Weibo's earnings per share (EPS) for 2025-2026, which is projected at $2.12.
Despite the reduction in the target price and a cautious near-term outlook, Citi maintains its Buy rating on Weibo shares, citing the stock's undemanding valuation as a key factor in its investment thesis.
InvestingPro Insights
As Weibo Corp (NASDAQ:WB) navigates through its current financial landscape, recent data from InvestingPro provides a deeper understanding of the company's position. With a market capitalization of $2.14 billion and a strikingly high gross profit margin of 78.73% for the last twelve months as of Q4 2023, Weibo's financial health appears robust. The company's ability to hold more cash than debt on its balance sheet is a reassuring sign for investors, especially in an unpredictable market.
The company's P/E ratio stands at a modest 7.45, with an adjusted P/E ratio from the last twelve months dropping even lower to 6.51, suggesting that the stock could be undervalued. This aligns with Citi's perspective on the stock's valuation. Additionally, Weibo's liquid assets surpass its short-term obligations, indicating a strong liquidity position that could help the company navigate short-term economic fluctuations.
While Weibo's revenue has seen a slight decline, the InvestingPro Tips highlight that the company is expected to be profitable this year and has been profitable over the last twelve months. Moreover, for those looking to explore further insights and analytics, InvestingPro offers additional tips – a total of 9 more – for Weibo Corp, which can be accessed with a subscription. Interested readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing a comprehensive toolkit for informed investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.