Bulls and bears col­lide asWeibo growth con­tin­ues

China Daily (USA) - - BUSINESS MARKETS - By BLOOMBERG

Weibo Corp stock price has morethan dou­bled this year as steady user growth and an im­proved sales out­look have lured in­vestors to Chi­nese so­cial me­dia. But, short sell­ers are be­com­ing in­creas­ingly con­vinced the stock has peaked.

Bear­ish bets on Weibo, China’s an­swer to Twit­ter Inc, are at the high­est ever, even after the com­pany re­ported earn­ings that beat an­a­lysts es­ti­mates and fore­cast a big­gerthanin­crease in third-quar­ter rev­enue. The Nas­daq-traded stock posted a 19 per­cent gain last week, while the num­ber of shares bor­rowed for short sell­ing rose to a record 4 mil­lion.

Bullish in­vestors are bet­ting that tele­vi­sion and video part­ner­ships the com­pany has been forg­ing will fur­ther boost the num­ber of peo­ple us­ing Weibo, which has been grow­ing at a steady rate of about 30 per­cent an­nu­ally for the past two years. Short sell­ers are wa­ger­ing that a 119 per­cent rally this year, twice as much as the sec­ond-big­gest gainer among Chi­nese stocks in the United States, has be­come ex­ces­sive.

“There is a lot of op­ti­mism re­gard­ingWeibo,” Henry Guo, an an­a­lyst at New York-based M Sci­ence LLC who has been cov­er­ing Chi­nese Amer­i­can de­posi­tary re­ceipts for a decade, said last week. “In­vestors bet that it has a po­ten­tial to ex­pand and mon­e­tize its busi­ness. The ques­tion short sell­ers are ask­ing is, ‘Can the stock rally last for­ever?’ ”

Since it was spun off from Sina Corp in April 2014, Weibo’s stock has ral­lied 151 per­cent. Sina’s ADRs gained 33 per­cent dur­ing the same pe­riod.

Weibo, backed by Alibaba Group Hold­ing Ltd, has been adding video con­tent and livestream­ing fea­tures to its mi­cro-blog­ging ser­vice, help­ing to boost the num­ber of monthly ac­tive users to 282 mil­lion in the sec­ond quar­ter, Chief Ex­ec­u­tive Of­fi­cer Wang Gaofei said in the sec­ondquar­ter earn­ings state­ment last week. The com­pany pro­jected third-quar­ter rev­enue of as much as $178 mil­lion, ex­ceed­ing an­a­lysts’ es­ti­mates of $165 mil­lion.

In­vestors bet that it has a po­ten­tial to ex­pand and mon­e­tize its busi­ness.” an an­a­lyst at New York-based M Sci­ence LLC

Henry Guo,

The shares sell for 49 times pro­jected earn­ings, above the av­er­age mul­ti­ple of 42 among nine global peers, in­clud­ing Twit­ter and Facebook Inc, ac­cord­ing to data com­piled by Bloomberg. David Riedel, pres­i­dent of New York-based Riedel Re­search Group Inc, who cut Weibo to sell from buy in­May, said last week that he’s neg­a­tive on the stock mostly be­cause it’s “cheaper to buy the Weibo ex­po­sure via Sina”.

Other an­a­lysts, in­clud­ing those from Cit­i­group Inc and Jef­feries Group, have re­cently raised their rec­om­men­da­tions to buy. Weibo’s sec­ond-quar­ter per-share earn­ings rose to 16 cents, com­pared with an es­ti­mate of 11 cents.

This is good news forKraneShares’ Bren­dan Ah­ern, who has been in­creas­ing his po­si­tion in the stock this year.

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