Weibo Recovery Still In The Works Due To Soft Ad Revenue, Analyst No Longer Bullish

When Weibo Corp WB reported mixed fourth-quarter results, the recovery in its advertising revenues was softer than anticipated in 2023.

The company now seems headed for incremental sales and margin pressure this year, according to Goldman Sachs.

The Weibo Analyst: Timothy Zhao downgraded the rating for Weibo from Buy to Neutral, while reducing the price target from HK$133 (US$17.10) to HK$83 (US$10.60).

The Weibo Thesis: The company’s revenue recovery was impacted by weaker household consumption and stiff content competition, especially in the FMCG vertical, Zhao said in the downgraded note.

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“We have seen continued soft revenue from beauty and personal brands, due to structural wallet share loss to SFVs,” he added.

Higher investments in vertical content, like 3C, auto, gaming, healthcare, and travel, could result in “incremental sales/margin pressure in 2024E,” the analyst wrote.

“We expect Weibo’s ad revenue to grow 3-4% yoy in 2024E or 3% CAGR in 2023-26E (cFX), with non-GAAP operating margin stepping down -2.4pp yoy in 2024E due to investments in vertical content and user growth,” he further stated.

WB Price Action: Shares of Weibo had declined by 1.79% to $9.33 at the time of publication on Thursday.

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