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Here's Why the Best Is Yet to Come for Weibo Corporation

By Anders Bylund - Updated May 9, 2018 at 2:14PM

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This young business with an impressive pedigree has a lot of growing left to do.

Weibo (WB -2.35%) shares have raced 149% higher over the last 52 weeks. The closest thing to a Chinese version of Twitter (TWTR -0.56%) is setting new all-time highs on an almost daily basis.

But this is just the beginning. Weibo's best days are yet to come.

Two young Chinese women engrossed in their smartphones.

Image source: Getty Images.

A picture says so much

The Twitter comparison is usually meant as a compliment, but Weibo is actually a much better company in many ways.

You might think of Twitter as the larger and more experienced social network. But the American company sports 330 million monthly active users these days versus 392 million for Weibo. In its latest earnings release, Twitter's user count grew 12% year over year. Weibo's Rolodex expanded by 25% over the same period.

It's true that Twitter produces more revenue from a smaller user base, but those windfalls fall away before reaching the bottom line. Which one of these stocks would you rather own -- the one with large but stalled sales and negative earnings, or the one with skyrocketing growth and positive bottom-line profits?

WB Revenue (TTM) Chart

WB Revenue (TTM) data by YCharts

 

Weibo comes from an esteemed background, having spun out from online services giant Sina (SINA) in early 2014. The new business has already eclipsed its parent company in some ways, with a combination of swift sales growth and much wider profit margins. This is the crown jewel in Sina's business collection.

What's next?

Catering exclusively to Chinese-language customers, Weibo's business runs almost entirely within the Middle Kingdom. The company could widen its horizons by adding translated versions of its social networking tools. Sina does offer an English version of its online portal, so this wouldn't exactly be a revolutionary move.

Maybe that's an idea for a later date. For now, Weibo is making no obvious effort to appeal to non-Chinese audiences. Instead, the company is doubling down on its core market from several different angles. From cross-selling partnerships and video sharing to building artificial intelligence into its content feeds, Weibo is exploring many potential growth drivers here.

As you see in the chart above, these ideas are paying off. Weibo's sales and profits are not just growing -- they are accelerating. And these are still early days for a young company that hasn't even considered going abroad.

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Stocks Mentioned

SINA Corporation Stock Quote
SINA Corporation
SINA
Twitter, Inc. Stock Quote
Twitter, Inc.
TWTR
$39.19 (-0.56%) $0.22
Weibo Corporation Stock Quote
Weibo Corporation
WB
$23.26 (-2.35%) $0.56

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