WestEnd511
Long/short equity, growth, contrarian

Weibo: Tough Road Ahead; Initiating With $15 Target, 27% Downside

I am initiating on Weibo (NASDAQ:WB) with an anti-consensus Sell rating and a DCF-backed price target of $15, implying a 27% downside. I believe that the street is highly bullish on the prospect of Weibo with five brokers assigning an average target price of $23 (14% upside), as they are overly focused on revenue growth and not enough on the operating metrics (i.e. User engagement and time spent). Moreover, the consensus does not see a meaningful difference between Weibo and Tencent's (OTCPK:TCEHY) social messaging app, WeChat, which I view as direct competitors for user engagement, in particular on mobile devices. Finally, WB faces higher regulatory risk than other social networking platforms. As China is attempting...

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