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What's in the Cards for Weibo (WB) This Earnings Season?

Aniruddha Ganguly

Weibo Corporation WB is expected to report fourth-quarter 2018 results soon.

The company beat the Zacks Consensus Estimate in the trailing four quarters, delivering average positive surprise of 4.3%.

In the last reported quarter, the company’s earnings of 75 cents per share surpassed the Zacks Consensus Estimate by a penny. The figure also came ahead of the year-ago quarter earnings of 51 cents per share.

Revenues increased 43.8% year over year to $460 million and came ahead of the Zacks Consensus Estimate of $454 million.

Weibo expects revenues between $480 million and $490 million, an increase of 35-38% year over year on a constant currency basis in the to be reported quarter.

The Zacks Consensus Estimate for fourth-quarter earnings has declined 1.3% in the past 30 days to 79 cents per share. Earnings are estimated to increase 23.4% year over year. Further, the consensus mark for revenues is pegged at $483.7 million, up roughly 28.1% from the year-ago quarter.

Let’s see how things are shaping up for the upcoming announcement.

Weibo Corporation Price and EPS Surprise

Weibo Corporation Price and EPS Surprise | Weibo Corporation Quote

Factors Likely to Influence Q4 Results

Weibo is expected to benefit from user base expansion. In the last reported quarter, monthly active users (MAUs) grew 19% year over year and reached 445.9 million.

The company is witnessing robust growth in the short video segment. Notably, short video views and posts grew in double digits in the last reported quarter. Moreover, Weibo is likely to benefit from growing traction in its video products, which will expand the company’s user base.

Higher engagement of content creators on Weibo is a positive. In the last reported quarter, the company expanded its strategic cooperation with 2,200 top content creators, up double-digit year over year.

Weibo acquired live streaming platform, Yizhibo, in the fourth quarter. This move is expected to aid the company in gaining traction with quality video content. Moreover, it will help Weibo in improving monetisation in the to-be reported quarter.

Weibo’s ability to generate higher return on investment (ROI) for advertisers, owing to its popularity and increasing user base, is expected to drive advertising revenues. Notably, advertising and marketing revenues in the third quarter were 409.2 million, up 48% year over year.

Further, the company’s uni-marketing program with Alibaba that enables brand advertisers to target appropriate audience is expected to drive the top line in the to-be reported quarter. Such collaboration with third parties bodes well for Weibo as it enhances key accounts (KA) ad revenues. Notably, KA ad revenues increased 73% year over year in the last reported quarter.

However, intensifying competition in short video industry is a headwind. Additionally, sluggishness in organic growth of mobile Internet users is a concern.

Weibo’s advertising revenues are also expected to hurt by lower advertising spending related to new mobile games due to the suspension in mobile game license approval in China. The suspension delayed launch of games by prominent developers.

Waning macroeconomic conditions in China took a toll on Weibo. Merchant advertising spending decreased across auto services, wedding business and auto consumer sector among others. This is expected to negatively impact the top line in the to-be reported quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided.

Weibo has a Zacks Rank #4 and an Earnings ESP of +1.27%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With a Favorable Combination

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming releases:

Square, Inc. SQ has an Earnings ESP of +6.06% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gogo Inc. GOGO has an Earnings ESP of +9.46% and a Zacks Rank #2.

HubSpot, Inc. HUBS has an Earnings ESP of +2.28% and a Zacks Rank #3.

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