Weibo Inc (ADR) (NASDAQ:WB) is a Chinese social media company that had its roots as a micro-blogging site.
That is how it got its reputation or shorthand corporate description as the Twitter Inc (NASDAQ:TWTR) of China.
And WB stock is still a great buy.
A large chunk of WB is owned by online firm Sina Corp (NASDAQ:SINA) as well as online retailer Alibaba Group Holding Ltd (NYSE:BABA). While this arrangement is unusual for U.S. firms — basically, it would be like Alphabet Inc (NASDAQ:GOOGL) and Amazon.com Inc (NASDAQ:AMZN) owning a large stake in TWTR) — it is pretty common in China.
And this arrangement works very well. It means that WB gets major exposure on SINA and BABA sites and pages. It’s a virtuous circle for all three companies.
What’s more, for the Chinese authorities, it’s also a way to help keep these new tech firms honest. Most of the big Chinese firms have government regulators that have offices (even departments) inside the firms. If they can cover more firms without deploying more people, so much the better. And if they can make policies that can be implemented through more companies simultaneously, that’s also a plus.
But the real story here is the Chinese consumer. Remember, there are 15 cities in China with populations that are greater than 10 million people. The U.S. doesn’t have a single one. New York City, the largest city in the U.S. has a population around 8.5 million. And China is roughly the size of the U.S.
The point is, when Chinese consumers start to spend it’s a big deal. It has been almost a decade since the Chinese economy has been running on all cylinders, but as the U.S. and other developed economies recharge, so has China.
And given the median age in China is 35 years old — in the U.S. it’s 37.5 — there are a lot of young people that use social media, which is ruled by WB.
In early November WB reported Q3 earnings. Revenue grew by 61% compared to last year’s stellar quarter. Its monthly active users were up more than 25% for the quarter, to 376 million. And it now has 33 million more daily active users, putting the total at 165 million.
And WB is more than just a social network. It also sells video games and other products. That’s why while advertising revenue grew 56%, its non-advertising revenue grew 92%.
Yes, WB stock is up 111% year to date. It’s trading at all-time highs and it has a current P/E of 99. And all that said, it’s still a great buy here.
— Louis Navellier
Source: Investor Place