Goldman Sachs Upgrades Weibo Corp (WB) to Buy

Goldman Sachs analyst Timothy Zhao upgraded Weibo Corp (NASDAQ: WB) from Neutral to Buy with a price target of $25.00 (from $19.30).

The analyst comments "We expect the weak brand advertising spending trend relative to performance ads and e-commerce ads in 2022 to reverse in 2023E on a faster re-opening and stronger macro/household consumption outlooks. In particular, we believe Weibo, which draws over 2/3 of its ad revenue from retail/consumption related categories, will enjoy faster revenue/earnings growth from 2Q23E, which resembles its recovery path from mid-2020 to mid-2021. We revise up our 2023-24E revenue/profitability forecasts by 4-5%, and expect above-consensus revenue growth of +9% yoy and non-GAAP net profit growth of +17% yoy in 2023E (in Rmb terms). We upgrade Weibo (WB/9898.HK), one of the three leading social media platforms in China by MAU/DAU, from Neutral to Buy, with revised 12-month target prices of US$25/HK$194 implying 27%/26% upside potential, respectively. We believe the stronger fundamentals outlook will likely lead to valuation repair for Weibo from the current 8.7x 2023E P/E, as happened in 2020-21 when the stock’s 1-year forward P/E multiple expanded from 14-15x in 2Q-3Q20 to 18-19x in 1H21. We apply a higher 10x target P/E multiple (vs. 8.5x prior) to Weibo’s 2024E non-GAAP EPS of US$2.48, which remains 1x deviation below its average P/E multiple of 14x since 2019 as we account for slower user growth from an enlarged MAU base and competition from other ad platforms including Tencent’s Weixin Video Account."

For an analyst ratings summary and ratings history on Weibo Corp click here. For more ratings news on Weibo Corp click here.

Shares of Weibo Corp closed at $19.68 yesterday.

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