The company's stock is now up 25.80% since May, but it is still down more than 26% year-to-date. Shares of the company are also trading slightly above the Peter Lynch earnings line, which suggests that they could be a little overvalued even after this more recent drop.
Highlights from recent quarterly results
In its results for the third quarter of 2020, Weibo posted a 14.29% year-over-year decline in earnings per share to $0.66. This was still better than the consensus analyst expectation of $0.60. Revenue for the period fell by 0.43% year-over-year to $465.74 million, which again outperformed the Wall Street estimate of $449.26 million.
Gaofei Wang, CEO of Weibo, said that the board was pleased with the company's recovery trend despite persistent challenges:
"Weibo's KA business delivered broad-based recovery, with a record-high number of brand customers marketing with us. We are glad to see brands increasingly recognize Weibo's unique value proposition in reaching young audience, leveraging KOL's influence, and serving brand plus performance needs."
He also praised the company's advertising business, citing recent system upgrades as key to driving value for customers. Advertising and marketing revenues increased 1% to $416.7 million year-over-year, which was significant given the challenging environment.
Value-added-services revenue declined 11% to $49.1 million over the same period.
The company's monthly active users were 511 million at the end of September after adding 14 million during the quarter. Daily active users grew by 8 million to 222 million.
Weibo expects fiscal Q4 2020 revenues to grow by 1%. This figure includes a recent acquisition of an interactive entertainment company. The new acquisition is expected to contribute approximately 2% of the company's Q4 revenues.
From a valuation perspective, shares of Weibo are currently trading at a trailing 12-month price-earnings ratio of 17.93. This is relatively in line with its peer Baidu Inc. (BIDU, Financial), which trades at a price-earnings ratio of 17.96.
However, shares of Weibo still look cheaper compared to Baidu when we factor in expected growth for the next five years. Weibo has a PEG ratio of 1.66 versus Baidu's 2.31. However, this is slightly higher than that of another Chinese internet giant, Sina Corp (SINA, Financial), which trades at a PEG ratio of 1.37. Overall, shares of Weibo appear to be trading relatively in line with close peers. The stock also appears to be fairly valued after Monday's pullback.
Disclosure: No positions in the stocks mentioned.
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