Why Weibo Corp. Shares Will Soar to $24

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Weibo Corp.  (NASDAQ: WB  ) rallied 2% today after Goldman Sachs initiated coverage on the Chinese social media coverage with a buy rating.

So what: Along with the bullish call, analyst Piyush Mubayi planted a price target of $24 on the stock, representing about 23% worth of upside to yesterday's close. So while momentum traders might be turned off by Weibo's price weakness in recent weeks, Mubayi's call could reflect a sense on Wall Street that its growth prospects are becoming too cheap to pass up.

Now what: According to Goldman, Weibo's risk/reward trade-off is rather attractive at this point. "Weibo attracts a broad range of content that in turn attracts a growing number of users and content providers, driving a virtuous cycle that reinforces its position as China's leading social media platform," said Mubayi. "Revenue visibility is supported by major stakeholders Sina (through which it transacts with advertisers) and Alibaba (with which the company expects to generate US$380 mn in ad revenues over 2013-2015). ... We believe Weibo offers attractive exposure to the growing mobile Internet market." Given Weibo's still-speculative nature and forward P/E in the high-70s, however, I'd hold out for a much wider margin of safety before buying into that bullishness. 

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Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On May 13, 2014, at 12:00 PM, TSIF wrote:

    Brian, I'd rec you as I usually do, but the title is too far out of whack with the article and your recommendation...it's a bad fit.

    I think there is too much competition for Weibo, it doesn't appear it is sticky, censorship also doesn't help, but it might get a boost when Alibaba IPO's if that goes well.

  • Report this Comment On May 13, 2014, at 10:17 PM, TruffelPig wrote:

    Weibo just had the IPO and I happened to buy at $18 and sell at $23. Small position unfortunately. That stock hasn't settled and is still wildly fluctuating. To call that "soar" is a bit funny when looking at the trading range since IPO.

  • Report this Comment On May 13, 2014, at 11:22 PM, nooobinvestor wrote:

    Seems like the Goldman Sachs upgrade rally actually happened yesterday before close, and the 2% today was just the tail end of it.

  • Report this Comment On May 23, 2014, at 1:23 PM, Borisbmx wrote:

    if Weibo is a effective hybrid between twitter and instagram will that make a difference in the risk reward balance?

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