Twitter (TWTR) and Weibo (WB -0.23%) are often considered comparable social networks. Twitter made it easy to post short messages, share them through hashtags, and follow celebrities and brands. Weibo, which mainly operates in China, has similar features as Twitter. The Chinese internet giant Sina spun off Weibo in an IPO in 2014, but it still retains a majority voting stake in the company.

Both stocks have been dismal investments this year. Twitter's stock has declined nearly 20%, while Weibo's stock has tumbled about 30%. Let's see why investors shunned both stocks, and if either one is worth buying.

A smartphone user accesses social networking apps.

Image source: Getty Images

What happened to Twitter?

At first glance, Twitter's business looks healthy. Its revenue rose 7% in 2020 as the pandemic throttled the growth of its ad business, but jumped 45% year over year in the first nine months of 2021 as those headwinds waned.

Twitter's total number of monetizable daily active users (mDAUs) rose 27% to 192 million in 2020. It ended the third quarter of 2021 with 211 million mDAUs, up 13% from a year ago. That expansion was led by its growth in overseas markets, especially Japan.

However, Twitter also became unprofitable in 2020, and it continued to bleed red ink in the first nine months of 2021. A large portion of those losses were caused by tax-related and litigation charges, but they were also amplified by a 30% increase to its headcount this year. 

Twitter also expects its upcoming sale of MoPub to reduce its revenue by $200-$250 million next year, which might make it tougher to achieve its goal of generating more than $7.5 billion in annual revenue by 2023. The abrupt departure of CEO Jack Dorsey, who just handed the reins over to his CTO Parag Agrawal, also raises additional concerns about its future.

Analysts expect Twitter's revenue to rise 37% this year but grow just 21% next year. On the bright side, they expect it to return to profitability (on an adjusted basis) this year, and for its adjusted earnings to improve next year. However, the stock still isn't cheap while trading at a whopping 193 times forward earnings.

Twitter is still growing, but its decelerating revenue growth, elevated expenses, CEO change, and premium valuation are all likely keeping investors away as inflation-related fears rattle the market.

What happened to Weibo?

Weibo's revenue fell 4% in 2020 as the pandemic reduced its ad sales. Its live streaming business also suffered a slowdown. But in the first nine months of 2021, Weibo's revenue jumped 39% year over year as those businesses recovered. Analysts expect its revenue to rise 37% for the full year.

Weibo's total number of monthly active users (MAUs) grew less than 1% year over year to 521 million at the end of 2020. However, it ended the third quarter of 2021 with 573 million MAUs, a 12% jump from a year earlier.

Unlike Twitter, Weibo has been consistently profitable on a generally accepted accounting principles (GAAP) basis. Its net income declined 37% in 2020, but rose 10% year over year in the first nine months of 2021 as the pandemic-related headwinds waned. Analysts expect its net income growth to accelerate in the fourth quarter and rise 54% for the full year.

Next year, they expect Weibo's revenue and earnings to grow 12% and 29%, respectively, which are still impressive growth rates for a stock that trades at just ten times forward earnings.

But Weibo's stock is cheap for several reasons. Sina's decision to take itself private earlier this year sparked speculation that Weibo would also take itself private at a low valuation. Weibo denied those rumors, and its IPO in Hong Kong earlier this month indicates it plans to stay public.

However, Weibo has also been hit by China's crackdown on its top tech companies. Its public relations director was arrested in August on bribery charges, and the company was recently fined three million yuan ($471,357) over problematic accounts and inappropriate content.

All those challenges, along with intense competition in China's advertising market and ongoing threats to delist Chinese stocks in the U.S., are keeping investors far away from Weibo and its industry peers.

Is either social media stock worth buying?

I'm not a fan of either stock right now. But if I had to choose one over the other, I'd stick with Twitter, for two reasons: Its new CEO could bring fresh ideas to the table and transform the aging social network, and it's simply too tough to own any Chinese tech stocks right now.