Image Source: Motley Fool.
What happened
Shares of Weibo Corporation (WB +0.24%) were sliding today on a widespread sell-off in Chinese tech stocks. As of 3:04 p.m. EST, the stock was down 9.8%.
So what
On a day when the Nasdaq was off 1.4%, Chinese tech stocks were getting hit especially hard. Alibaba was down 4% and several other Chinese tech stocks were off sharply, too, including the owner of China's Twitter-like service, Weibo.
Prior to today's sell-off, Weibo shares had nearly tripled this year, so today's dip could be seen as both a correction and profit-taking. China has also been targeted by president-elect Donald Trump several times, though a potential trade war would be unlikely to have an effect on a social-networking service like Weibo.
Now what
While there was no clear cause for either the Nasdaq's sell-off or the one in Chinese stocks, a comparison between Weibo and Twitter offers one explanation. Before today's slide, Weibo had a market cap of $11 billion, nearly as much as Twitter, and like its American counterpart, Weibo has struggled to generate a significant profit, with a P/E in triple digits. While the company has consistently beaten earnings estimates, its valuation may have become unmoored from reality -- meaning the recent pullback is warranted.
