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Why Shares of Weibo Are Down Today

By Timothy Green – Updated Apr 21, 2019 at 5:48PM

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The Chinese tech stock got hit with an analyst downgrade.

What happened

Shares of Weibo (WB -0.48%) slumped on Tuesday after the Chinese internet stock received an analyst downgrade. Tuesday's decline adds to a brutal sell-off that begin about a year ago. Weibo stock was down about 12.3% at 12:30 p.m. EST. Over the past year, shares have shed nearly 60% of their value.

So what

Analysts at Nomura Instinet lowered their rating on Weibo stock to "neutral" on Tuesday, down from a previous "buy" rating. Along with the rating cut, the Nomura analysts also slashed their price target on the stock to $64. That's down from a previous price target of $74.

A declining stock price chart.

Image source: Getty Images.

An already tumbling stock price may have something to do with this downgrade. After peaking above $140 at the beginning of 2018, shares of the Chinese company now trade for just over $50. Many Chinese stocks tumbled in 2018, in part due to the U.S.-China trade war. Weibo did not escape that pain.

Now what

Weibo's financial results have been impressive in recent quarters. Revenue surged 44% year over year in the third quarter of 2018, and the company posted solid profit margins and growing earnings. The stock has become a lot cheaper relative to earnings over the past year, but a previously lofty valuation may have been part of the reason for the steep decline.

Check out the latest Weibo earnings call transcript.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends Weibo. The Motley Fool has a disclosure policy.

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