Weibo Tumbles After Providing Weak Revenue Guidance

Weibo Corp

Weibo Corp (NASDAQ: WB) shares sank in early trading on Thursday after the social media company issued second quarter revenue forecast that fell short of street estimates.

The Chinese-based micro-blogging site, however, reported first quarter profit that was above expectations though revenue narrowly fell short of estimates.

Shares of the company lost more than 14% in premarket trading hours. As of 11:56 a.m. ET, the shares were down $6.36, or 12.43% to 44.80. The stock has dropped more than 22% since the beginning of the year, while the S&P 500 has risen 2.3%.

Analysts believe that media reports suggesting the ongoing trade disagreements between the U.S. and China will result into a “tech cold war,” has also overshadowed Weibo’s solid first quarter earnings.

WB Earnings & Outlook

Net income during the three months to March 31 came to $150.4 million, or $0.66 per share, compared with $99.1 million, or $0.44 per share, in the same period a year ago. Adjusted for one-time costs and gains, earnings came to $0.56 per share compared with $0.50 per share in the earlier-year period.

On average, analysts surveyed by Refinitiv had been calling for adjusted earnings of $0.52 per share in the quarter. Revenue was pegged at $399.2 million, up 14% from the March quarter of the previous year. Analysts polled by Refinitiv were expecting revenue of $398.82 million in the quarter.

Monthly active users came in at 465 million during the quarter, up nearly 13% on a year-over-year basis. Looking ahead into the current quarter, Weibo says it expects to post revenue of between $427 million to $437 million, which would be an increase of 7% to 10% year over year on the basis of a constant currency.

Analysts predict the company will report revenue of $482.1 million at the end of the current quarter. Other headwinds affecting the stock include proliferated censorship regulations in China and slowing Chinese economy.

Weibo CEO Comments

“We are pleased with Weibo’s first quarter results,” said Gaofei Wang, CEO of Weibo. “Weibo has delivered solid traffic growth through effective product upgrade and channel investment. We have also achieved strong advertising revenue growth for KA business, as we demonstrated unique value proposition for brand customers with the breadth of our social ad offerings and enhanced ad performance,” said Mr. Wang.

Weibo Corp. Profile

Weibo is the largest social media platform in China. As of 2016, Weibo had 313 million monthly active users and 139 million daily active users, many of whom are drawn there by the millions of key opinion leaders in entertainment, sports, and business circles.

Sina is the major shareholder, holding 49.9% of shares and with 75% voting power; Alibaba holds 31.5% of shares and 14.8% voting power.