Why Weibo Stock Fell 18% Today

This post was originally published on this site

What happened

Shares of Weibo (NASDAQ: WB) crashed hard on Thursday, falling as much as 18.1% in early trading. The social network operator, often called the Twitter of China, reported solid third-quarter results early in the morning, but the company also set its fourth-quarter revenue guidance far below the current Street view. Weibo’s stock had recovered slightly to a 15.5% drop at 11:20 a.m. EST.

So what

Weibo’s third-quarter sales rose 2% year over year to $468 million, in line with consensus analyst estimates. The core category of advertising sales increased by a minuscule 1% while value-added services posted a 9% revenue increase. That bump rested chiefly on the acquisition of a live video-streaming service that closed in the fourth quarter of 2018.

Adjusted earnings rose by 3%, landing at $0.77 per share. Here, your average analyst would have settled for $0.73 per share.

Looking ahead, Weibo’s management sketched out a fourth-quarter revenue target roughly 1.5% above the year-ago period’s result, which works out to approximately $489 million. The analyst consensus had been set at $496 million. Weibo will match the Street target only if it delivers fourth-quarter sales at the very top of the given guidance range.

A young Chinese woman sits on a hill overlooking some wetlands and a small town, focused on her smartphone.

Image source: Getty Images.

Now what

Weibo’s once-rampant revenue growth is slowing down significantly, dragging stock prices down as well. CFO Fei Cao called the fourth-quarter revenue guidance “conservative,” noting that the live video acquisition will provide a smaller year-over-year buyout boost in the fourth quarter and none in the reports beyond that.

Weibo’s shares are now trading 68% below the all-time highs they reached in early 2018, almost exactly in line with the share prices Weibo held three years ago. Growth stocks often take a beating when their revenue increases start to slow down, and that’s what I see in Weibo these days.

10 stocks we like better than Weibo
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Weibo wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of June 1, 2019

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool recommends Weibo. The Motley Fool has a disclosure policy.