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Why Weibo Stock Fell 14.2% in March

By Keith Noonan – Apr 9, 2019 at 7:48AM

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Weibo stock is up roughly 20% year to date despite last month's sell-offs.

What happened

Shares of Weibo (WB 0.43%) dipped 14.2% in March, according to data from S&P Global Market Intelligence. The Chinese social stock fell following the company's fourth-quarter earnings release.

Weibo published its fourth-quarter and full-year earnings results before the market opened on March 5. The company delivered another solid quarter of sales and earnings growth, but its guidance suggested that momentum at the business is slowing and caused some investors to sell out of the stock. 

A pair of hands using a mobile phone.

Image source: Getty Images.

So what

Weibo's fourth-quarter revenue grew 28% year over year to reach $481.9 million, with net income rising 26% compare to the prior-year period to hit $183.6 million and work out to per-share earnings of $0.08. The earnings performance came in significantly ahead of the average analyst estimate targets, which had called for per-share earnings of $0.03 on sales of $481.9 million.

Monthly active users for the December quarter came in at 462 million, up 15 million users sequentially and up 70 million users from the end of the prior-year quarter. Daily active users for the period totaled 200 million, up 28 million compared to the end of 2017's quarter. 

All in all, the company's fourth-quarter performance looked pretty solid across the board, but management's guidance left investors unimpressed. The company expects its first-quarter sales to come in between $395 million and $405 million, representing 22% growth year over year at the midpoint. 

Now what

Weibo stock bounced back in April, trading up roughly 16% in the month so far as the overall market has gained ground and Chinese stocks have seen some momentum, thanks to an improved outlook for a resolution to trade tensions between China and the U.S.

WB Chart

WB data by YCharts.

Weibo has bumped up against some issues with China's online content regulation bodies, and that continues to present a potential threat to the business, but the company looks non-prohibitively valued when placed in the context of its recent growth and remaining potential. The company's sales growth has been decelerating, but Weibo stock still has significant upside trading at roughly 23.5 times this year's expected earnings.

Keith Noonan 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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