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On Friday, Benchmark analysts maintained their Hold rating on shares of Weibo Corp (NASDAQ:WB), following the company’s fourth-quarter results, which slightly surpassed expectations. Despite trading at an attractive P/E ratio of 9.28 and maintaining impressive gross margins of 79%, Weibo experienced a 4% year-over-year decline in advertising revenue, highlighting the company’s sensitivity to macroeconomic conditions and competitive challenges. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value assessment. Despite this, Weibo anticipates more favorable trends in the 3C (computers, communications, and consumer electronics), automotive, and e-commerce sectors. However, the company is expected to continue facing headwinds in the gaming and fast-moving consumer goods (FMCG) categories.
For the fiscal year 2025, Benchmark analysts expect Weibo’s advertising revenue to stabilize year-over-year. They predict that non-advertising revenue will see a boost from membership upgrades, contributing to overall group-level growth at a low-single-digit rate on a constant currency basis. This projection remains unchanged from previous estimates.
Weibo’s management has noted some early positive effects from the integration of artificial intelligence (AI) into their platform, including enhanced user engagement, increased search usage, and higher effective cost per mille (ECPM). However, the broader implementation of AI is still in its infancy, and the overall benefits are not yet fully realized or guaranteed.
The company’s significant reliance on key accounts means that macroeconomic shifts will continue to be a significant factor for Weibo. The analysts at Benchmark foresee Weibo potentially losing further market share in the advertising domain. Consequently, they have decided to maintain their Hold rating on the stock, signaling a cautious stance towards Weibo’s future performance in the competitive advertising landscape.
In other recent news, Weibo Corporation reported its fourth-quarter 2024 results, with revenue slightly exceeding analyst expectations. The company posted revenue of $456.8 million, surpassing the consensus estimate of $453.11 million, while adjusted earnings per share were $0.40, aligning with forecasts. Advertising and marketing revenues saw a 4% decline year-over-year, largely due to challenges in the online gaming sector, though value-added services revenue grew by 18%, driven by membership services and game-related revenues. Weibo also announced a $200 million dividend payout for fiscal 2024, reflecting its confidence in future financial stability.
In terms of strategic developments, Weibo is increasing its research and development expenditures to integrate artificial intelligence (AI) into its operations, aiming to enhance user experiences and advertising monetization. During the earnings call, management highlighted the role of AI in improving search functions and content recommendations. Jefferies analyst Thomas Chong responded to these developments by raising the price target for Weibo to $12.10 from $10.90, maintaining a Buy rating on the shares. The analyst’s outlook suggests a positive view of Weibo’s strategic direction and potential revenue growth from targeted advertising sectors.
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