Investment Rating - The report maintains a "BUY" rating for Weibo, indicating a potential return of over 15% over the next 12 months [2][12]. Core Insights - Weibo's total revenue for 1Q24 decreased by 4% YoY to US$395 million, with non-GAAP net income down by 4% YoY to US$107 million, but ahead of consensus estimates due to better control of operating expenses [2][3]. - Advertising revenue is expected to remain flat YoY in 2Q24, primarily due to a decline in the cosmetics and beauty vertical, although management anticipates a recovery in the ad business in 2H24, supported by improved consumer sentiment and the upcoming Olympic event [2][3]. - The target price has been lowered to US$17.00 from US$18.80, reflecting a discount to peers' average valuation [2][3]. Revenue and Profitability - Total revenue forecasts for FY24-26 have been reduced by 2%, mainly due to shrinking ad budgets from cosmetics and beauty brands [2][3]. - The adjusted net profit for FY24E is projected at US$447 million, with a slight decline of 0.7% YoY, while FY25E and FY26E are expected to grow by 10.1% and 5.7% respectively [3][6]. - Non-GAAP operating profit margin improved to 31.8% in 1Q24, attributed to a 10% YoY reduction in total operating expenses [2][3]. Advertising Revenue Performance - Advertising revenue declined by 5% YoY to US$339 million in 1Q24, with the cosmetics and beauty vertical being the primary contributor to this decline [2][3]. - Despite the challenges in the cosmetics sector, domestic beauty brands saw over 50% growth in ad revenue in 1Q24, while other verticals like online games and 3C products experienced double-digit growth [2][3]. User Metrics and Strategy - Monthly Active Users (MAUs) decreased by 1% YoY to 588 million, while Daily Active Users (DAUs) remained flat at 255 million [2][3]. - The company is focusing on acquiring high-quality users through optimized channel investments, which is expected to increase the percentage of high-ARPU users [2][3]. Financial Position - As of March 31, Weibo had cash and cash equivalents of US$2.1 billion, sufficient to cover upcoming senior notes due in July 2024 and shareholder return initiatives [2][3]. - The company is expected to maintain a relatively stable cash position, with projected cash at the end of FY24E at US$2.6 billion [10].

Financial Data and Key Metrics Changes - Weibo's total revenues for Q1 2024 reached $395.5 million, a decrease of 4% year-over-year, or flat on a constant currency basis [7][29] - Total advertising revenues were $339 million, reflecting a decrease of 5% year-over-year, also flat on a constant currency basis [30] - Non-GAAP operating income was $125.8 million, representing a non-GAAP operating margin of 32%, a modest increase year-over-year [7][29] - Net income attributable to Weibo was $106.6 million, with a net margin of 27%, flat compared to the same period last year [29][33] Business Line Data and Key Metrics Changes - Mobile ad revenue accounted for approximately 95% of total ad revenue, amounting to $322.5 million [30] - The online game sector showed strong momentum with double-digit growth, benefiting from game license approvals and ad budgets for new titles [30][31] - The VAS (Value-Added Services) revenue was $56.5 million, a decrease of 3% year-over-year, but an increase of 1% on a constant currency basis [32] Market Data and Key Metrics Changes - The handset online game industry sustained double-digit growth year-over-year, while the cosmetic and beauty sector continued to decline year-over-year [23][24] - Ad revenues from domestic beauty brands grew over 50% year-over-year, although this growth did not fully offset the decline from international brands [24] - The food and beverage and apparel sectors returned to positive growth, while the FMCG category continued to face challenges [31][32] Company Strategy and Development Direction - Weibo's strategic objectives for 2024 include growing user scale and engagement, enhancing content ecosystem competitiveness, and improving operating efficiency [8][28] - The company is focusing on high-quality user acquisition and engagement, optimizing channel collaboration, and enhancing social and hot-trend products [9][10] - Weibo aims to strengthen its monetization capabilities by leveraging its strengths in hot-trends and IPs, while also driving vertical content ecosystems [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the recovery of advertiser sentiment in Q2 and the second half of the year, with expectations for improved performance in various sectors [36][39] - The company noted that while the cosmetic and beauty sector faced challenges, there was a positive trend in domestic brands, and they plan to strengthen cooperation with e-commerce platforms [24][25] - Management highlighted the importance of focusing on high ARPU users and enhancing user engagement to drive overall performance [55][59] Other Important Information - Weibo completed the distribution of a special dividend of $0.82 per ordinary share, totaling approximately $200 million [33] - The company released its third ESG report, detailing initiatives in areas such as cybersecurity, content quality, and social responsibility [34][35] Q&A Session Summary Question: Outlook for advertisement business in Q2 and second half - Management expects a cautious recovery in advertiser sentiment, with positive trends noted in various industries except for cosmetics [36][37] - Focus will be on effective-based advertising and leveraging hot topics and IPs for marketing campaigns [39][40] Question: User base adjustments and forecasts - Management confirmed a focus on acquiring high-quality users with higher ARPU, expecting stable or slight increases in DAU [52][55] - The strategy includes prioritizing user engagement and content generation capabilities to enhance overall performance [57][59]

Core Insights - Weibo Corporation reported revenue of $395.5 million for Q1 2024, a year-over-year decline of 4.4% and an EPS of $0.41 compared to $0.47 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $396.5 million, resulting in a surprise of -0.25%, while the EPS exceeded the consensus estimate of $0.40 by 2.50% [1] Performance Metrics - Average daily active users (DAUs) were reported at 255 million, below the estimated 262.37 million [2] - Monthly active users (MAUs) stood at 588 million, compared to the estimated 609.59 million [2] - Net revenues from value-added services were $56.55 million, slightly above the estimated $53.89 million, but a decline of 3.3% year-over-year [2] - Net revenues from advertising and marketing were $338.95 million, below the estimated $342.19 million, reflecting a year-over-year decline of 4.6% [2] Stock Performance - Weibo shares have returned +4% over the past month, while the Zacks S&P 500 composite increased by +6.1% [2] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [2]

Core Viewpoint - Weibo Corporation reported a solid start to 2024, focusing on user acquisition, content optimization, and improved monetization strategies, while aiming to enhance shareholder returns [1] Financial Performance - Net revenues for Q1 2024 were US$395.5 million, a decrease of 4% year-over-year, or flat on a constant currency basis [2][4] - Advertising and marketing revenues were US$339.0 million, down 5% year-over-year, or flat on a constant currency basis [2][4] - Value-added services (VAS) revenues were US$56.5 million, a decrease of 3% year-over-year, but an increase of 1% on a constant currency basis [2][4] - Income from operations was US$99.7 million, with an operating margin of 25%, compared to 23% in the previous year [5] - Net income attributable to Weibo's shareholders was US$49.4 million, with diluted net income per share of US$0.19 [7] - Non-GAAP income from operations was US$125.8 million, representing a non-GAAP operating margin of 32% [5][7] User Engagement - Monthly active users (MAUs) reached 588 million in March 2024, while average daily active users (DAUs) were 255 million [2] Cost Management - Total costs and expenses for Q1 2024 were US$295.8 million, a decrease of 7% compared to US$317.3 million in the same period last year [5] - The decrease in costs was attributed to lower personnel-related costs and marketing expenses [5] Non-Operating Results - Non-operating loss for Q1 2024 was US$23.6 million, compared to non-operating income of US$29.8 million in the same period last year [6] - The non-operating loss included net interest and other losses of US$18.6 million and a loss from fair value change of investments of US$3.6 million [6] Cash Position - As of March 31, 2024, Weibo's cash, cash equivalents, and short-term investments totaled US$3.3 billion [7]

Corporate Governance - Weibo Corporation held its 2024 annual general meeting of shareholders where several resolutions were adopted, including the re-election of Mr. Charles Chao, Mr. Pochin Christopher Lu, and Mr. Gaofei Wang as directors of the Company [1] Company Overview - Weibo is a leading social media platform in China that allows users to create, share, and discover content online, combining public self-expression with social interaction and content distribution [2] - The platform enables users to post feeds with multimedia and long-form content, allowing for asymmetric user relationships where any user can follow others and engage with their content [2] Advertising and Marketing - Weibo generates a substantial majority of its revenue from advertising and marketing services, offering a variety of solutions for companies of all sizes [3] - The platform features social display advertisements and promoted marketing offerings, utilizing a recommendation engine to enhance audience targeting based on demographics, social relationships, interests, and behaviors [3]

Group 1 - Weibo Corporation will announce its unaudited financial results for Q1 2024 on May 23, 2024, before the U.S. market opens [1] - Following the financial results announcement, Weibo's management will host a conference call to discuss the company's financial performance and business operations [1] - A live and archived webcast of the conference call will be available on Weibo's investor relations website [1] Group 2 - Weibo is a leading social media platform that allows users to create, share, and discover content in real time [2] - The platform supports asymmetric user relationships, enabling any user to follow others, comment, and repost content, fostering viral conversations [2] - Weibo generates most of its revenue from advertising and marketing services, including social display advertisements and promoted marketing offerings [3] Group 3 - Weibo employs a "mobile first" approach, displaying content in a simple information feed format and offering native advertisements that align with this format [3] - The company has developed a social interest graph recommendation engine to enhance marketing effectiveness by targeting audiences based on demographics, social relationships, interests, and behaviors [3]

Core Points - Weibo Corporation filed its annual report on Form 20-F for the fiscal year ended December 31, 2023, with the U.S. Securities and Exchange Commission on April 25, 2024 [1] - The annual report is available on Weibo's investor relations website and can be requested in hard copy by shareholders and ADS holders [1] Company Overview - Weibo is a leading social media platform in China that allows users to create, discover, and distribute content [2] - The platform supports real-time public self-expression and social interaction, enabling users to follow others, comment, and repost content [2] Advertising and Marketing - Weibo generates a substantial majority of its revenues from advertising and marketing services, including social display advertisements and promoted marketing offerings [3] - The company employs a "mobile first" philosophy, displaying content in a simple information feed format and offering native advertisements that align with this format [3] - Weibo has developed a social interest graph recommendation engine to enhance marketing effectiveness by targeting audiences based on demographics, social relationships, interests, and behaviors [3]

Financial Performance - Net income attributable to Weibo's shareholders for the year ended December 31, 2022, was $10,000, down from $214,709 in 2021[3] - The company reported a net income of $351,340 for the year ended December 31, 2023, compared to $198,267 in 2021[3] Costs and Expenses - Total costs and expenses for the year ended December 31, 2021, were reported at $1,587,290, an increase from $1,370,286 in 2022[2] - Interest expense for the year ended December 31, 2023, was $(122,498), compared to $(56,462) in 2021[3] - The cost of revenues for the year ended December 31, 2023, was $369,321, a decrease from $406,643 in 2021[3] - Sales and marketing expenses for the year ended December 31, 2023, were $456,648, down from $480,010 in 2022[3] - Product development costs for the year ended December 31, 2023, were $320,258, a decrease from $441,539 in 2021[3] - General and administrative expenses for the year ended December 31, 2023, were $100,913, a decrease from $142,090 in 2021[3] Investments and Fair Value - Fair value changes through earnings on investments for the year ended December 31, 2022, were reported at $(252,475), a significant decrease from $(266,472) in 2021[2] - The company reported a fair value change of $63,336 through earnings on investments for the year ended December 31, 2023[3] - Long-term investments increased to $1,320,386, reflecting a fair value adjustment of $55,921[4] - The fair value of investments measured at fair value through profit or loss was adjusted to reflect market conditions[4] Balance Sheet Highlights - Total assets as of December 31, 2023, reported under U.S. GAAP were $7,280,358, with total liabilities of $3,762,742[4] - Total shareholders' equity amounted to $3,448,888, with a decrease in accumulated other comprehensive loss to $(217,817)[4] - The redeemable non-controlling interest was recorded at $68,728, indicating a significant change in ownership structure[4] - The company reported a total of $317,625 in convertible senior notes, with a fair value adjustment of $38,920[4] - Retained earnings for Weibo shareholders reached $2,187,556, after accounting for various adjustments[4] - The total liabilities, redeemable non-controlling interests, and shareholders' equity combined were $7,280,358[4] - The company recognized a financial liability of $79,623 related to lease obligations[4] - The company’s additional paid-in capital was reported at $1,428,935, with adjustments for share-based compensation[4]

User Engagement and Growth - Weibo's MAUs increased from 573 million in December 2021 to 598 million in December 2023, while average DAUs rose from 249 million to 257 million during the same period, maintaining a DAU to MAU ratio of 43%[700]. - The company plans to enhance user experience and engagement by improving product features and refining its SIG recommendation engine[707]. - Weibo aims to increase monetization through user base growth, improved user engagement, and effective management of advertisement inventory[710]. - Weibo's brand recognition strategy focuses on user scale and engagement, optimizing channel investments to enhance user acquisition efficiency[713]. Financial Performance - Revenues for Weibo were reported at US$2,257.1 million in 2021, US$1,836.3 million in 2022, and US$1,759.8 million in 2023, with net income attributable to shareholders of US$428.3 million, US$85.6 million, and US$342.6 million respectively[703]. - Total net revenues decreased by 4% from US$1,836.3 million in 2022 to US$1,759.8 million in 2023, primarily due to the depreciation of RMB against the U.S. dollar[730]. - Advertising and marketing revenues decreased by 4% from US$1,596.7 million in 2022 to US$1,534.0 million in 2023, with the total number of advertisers dropping from 1.0 million to 0.7 million[731]. - Value-added services revenues decreased by 6% from US$239.7 million in 2022 to US$225.8 million in 2023, mainly due to RMB depreciation[733]. Cost Management - Total costs and expenses decreased by 5% from US$1,355.9 million in 2022 to US$1,286.9 million in 2023[739]. - Cost of revenues decreased by 7% from US$400.6 million in 2022 to US$374.3 million in 2023, attributed to lower labor and bandwidth costs[740]. - Sales and marketing expenses decreased by 3% from US$477.1 million in 2022 to US$461.4 million in 2023[741]. - Product development expenses decreased by 20% from US$415.2 million in 2022 to US$333.6 million in 2023, mainly due to reduced personnel-related expenses[742]. - General and administrative expenses increased by 123% from US$52.8 million in 2022 to US$117.6 million in 2023, largely due to the reversal of compensation costs[743]. Tax and Regulatory Environment - The company is entitled to a preferential tax rate of 15% due to its qualification as a "High and New Technology Enterprise," which will expire in 2025 unless renewed[719]. - Research and development expenses can be claimed at a rate of 200% for tax deductions since January 1, 2023, enhancing the company's investment in innovation[720]. - Weibo's advertising revenues are subject to a cultural business construction fee reduced to 1.5% until December 31, 2024, following a temporary exemption during the COVID-19 pandemic[721]. Cash Flow and Investments - Net cash provided by operating activities was US$672.8 million in 2023, compared to US$564.1 million in 2022[758][765]. - Cash and cash equivalents at the end of 2023 were US$2,584.6 million, down from US$2,690.8 million at the end of 2022[758]. - Net cash used in investing activities in 2023 was US$736.8 million, mainly due to cash paid on long-term investments of US$602.7 million and purchases of bank time deposits and wealth management products totaling US$755.3 million[768]. - Capital expenditures were US$35.1 million in 2021, US$43.1 million in 2022, and US$36.8 million in 2023, indicating ongoing investment to support business growth[776]. Shareholder Returns - A special cash dividend of US$0.85 per ordinary share and ADS was approved in May 2023, totaling US$200.1 million for the year[897]. - A subsequent special cash dividend of US$0.82 per ordinary share and ADS was approved in March 2024, expected to total approximately US$200 million[898]. - For the years ended December 31, 2021 and 2022, dividends to shareholders were nil, indicating a significant increase in 2023[897]. Corporate Governance and Management - The company has the right to seek damages if a duty owed by its directors is breached, reflecting its commitment to corporate governance[833]. - The board of directors consists of seven members, with one female director and six male directors as of March 31, 2024[835]. - The audit committee is composed of two independent directors, Mr. Pochin Christopher Lu and Mr. Pehong Chen, with Mr. Lu serving as the chair[831]. - The compensation committee, chaired by Mr. Pehong Chen, is responsible for reviewing and approving the total compensation packages for executive officers and non-employee directors[832]. Employment and Compensation - The company had 5,268 employees as of December 31, 2023, with the largest function being product development, which accounted for 2,284 employees[836]. - The company paid an aggregate of approximately US$3.9 million in cash and benefits to its executive officers for the year ended December 31, 2023[817]. - The company has not set aside or accrued any amount to provide pension, retirement, or other similar benefits to its executive officers and directors[817]. - The company has entered into employment agreements with its senior executive officers, allowing termination for cause without remuneration[818].

Key PointsWeibo is ripe for reversal because it is deeply undervalued after years of downtrend. Analysts lowered their targets, but the market overextended and is now below the low end of the range. Weibo issued another special dividend and may begin regular payments soon, a catalyst for the market. 5 stocks we like better than WeiboWeibo NASDAQ: WB stock is deeply undervalued and ripe for a reversal. The stock is trading at only 5x its earnings, the lowest among China’s social media operators, and analysts ...