Why Weibo Corp (NASDAQ: WB) Stock Is Under Pressure

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Weibo Corp (NASDAQ: WB) stock fell over 4.1% on 29th September, 2020 (as of 12:11 pm GMT-4; Source: Google finance) on overall bearish momentum of the market. For the second quarter of FY 20, Advertising and marketing revenues fell 8% year-over-year or 5% on a constant currency basis to $340.6 million. 89% of the ad revenues come from mobile. Weibo’s MAU rose 8% year-over-year to 523 million in June 2020, and average DAUs grew 9% year-over-year to 229 million in June 2020. 94% of Weibo’s MAU came from mobile. Moreover, KA revenues declined by 3% year-over-year or flat in renminbi terms and rose 30% quarter-over-quarter to reach $165.9 million. The strong recovery of the KA advertising business was mainly due to the well-controlled pandemic situation in China, which led to recovery of the business activity, and improving advertising demand long with the efforts in driving value for advertisers to achieve branding plus performance effects, with the unique social marketing solutions. SME ad revenues declined 21% year-over-year or 18% in renminbi terms.

The company posted the operating income of $121.9 million, representing operating margin of 31%. The company has reported the net income attributable to Weibo of $114.5 million. At the end of June, 2020, Weibo’s cash, cash equivalents and short-term investments were of total $2.33 billion compared to $2.4 billion as of December 31, 2019.

And sequentially, SME ad revenue grew 16%. Despite recovery economic activities this quarter, many small and medium-sized advertisers are still facing headwinds in their business operations, especially for offline merchants. Consequently, the company expects that it will take time to the overall SME ad spend to rebound to the pre-pandemic level, even though online sectors, such as gaming and online education, continued to book encouraging growth rate on a year-over-year basis this quarter. Value-added service, VAS, revenues fell 23% or 21% on a constant currency basis to $46.8 million in the second quarter, mainly due to decrease of live streaming business and was partially offset by increase in membership revenues.

WB in the second quarter of FY 20 has reported the adjusted earnings per share of 49 cents, beating the analysts’ estimates for the adjusted earnings per share of 48 cents. The company had reported 10 percent fall in the adjusted revenue to $382.09 million in the second quarter of FY 20, beating the analysts’ estimates for revenue of $381.05 million.

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