Weibo Sharm.docx

COMPANY BACKGROUND Weibo Corporation, incorporated in 2010, is a social media platform for people to create, distribute and discover Chinese-language content. The Company provides ways for people and organizations to publicly express themselves in real time, interact with others on a global platform and stay connected with the world. The Company operates through two segments: advertising and marketing services, and other services. The Company has a range of users, including ordinary people, celebrities and other public figures, as well as organizations, such as media outlets, businesses, government agencies and charities. The Company's product categories include those for users, advertising and marketing customers and platform partners. Products for Users The Company offers self-expression products that enable its users to express themselves on its platform; social products to promote social interaction between users on its platform; discovery products to help users discover content on its platform, and notifications to notify users on Weibo account activities through short message service (SMS) or push notification on their device. The Company offers third-party online games, including role playing games, card games, strategy games and real life simulation games. Most Weibo games are offered for free and certain games allow users to purchase virtual currency, known as Weibo Credit, to redeem virtual items. Its very important person (VIP) membership offers its users certain services and functions that are not available to regular users. With these additional functions, VIP members can follow more users, have more ways to personalize their Pages, can send voice feeds, enjoy more cloud storage, receive additional options to manage information flow and followers, receive SMS notification of Weibo account activity and have access to games. VIP membership is available through monthly or annual subscriptions. It has also developed a suite of mobile applications, including Weibo Headlines, which aggregates news and information from Weibo and other online sources, and Weibo Weather, a weather application in China that features weather condition, particle matter index (PMI) and other information, such as scenic photos from cities that the users selected to follow. Products for Advertising and Marketing Customers The Company seeks to provide advertising and marketing solutions to enable its customers to promote their brands and conduct marketing activities. It provides its customers with analytical tools to enable them to track and improve the effectiveness of their marketing campaigns on its platform. Its advertising and marketing customers include accounts, Alibaba/e-commerce merchants, small and mediumsized enterprises (SMEs) and individuals that seek a spectrum of online advertising and marketing services ranging from brand awareness to interest generation, sales conversion and loyalty marketing. It offers advertising and marketing solutions, including social display advertisements and promoted marketing. Its promoted marketing includes promoted feeds, promoted accounts and promoted trends.

Products for Platform Partners The Company seeks to provide its platform partners with tools and application programming interface (API) that customers can use to share their content to Weibo's platform, distribute Weibo content across their properties and enhance their Websites and applications with Weibo content, and to build social applications on Weibo or integrate their products with Weibo. Weibo's platform partners include traditional and online media outlets, as well as developers of games and other applications. Products offered for its platform partners include Weibo Connect, which allows its platform partners to link their Websites and mobile applications to its platform, enabling their users to share content to Weibo; Weibo Service, which is open API that allows third-party developers to build applications to serve individual and organization users; Weibo Credit, which allows its users to purchase in-game virtual items and other types of fee-based services on Weibo and for its platform partners to receive payment, and Weibo wallet, which enables individuals and businesses to hand out red envelops to build active follower base. The Company competes with Tencent, Netease, Sohu, Phoenix New Media, Twitter, Instagram, Facebook, WhatsApp, Line, Kakao Talk, Snapchat, iQiyi, Youku Tudou, Bitauto, Autohome, Meituan/Dianping, Qunar, Baidu, UC Web, Qihoo 360, Weixin/WeChat, QQ Mobile, Qzone Mobile, Yixin, Laiwang, Douban, Baidu Post, Momo, Inke, In, Nice, Paipai, Meipai and Jinritoutiao.

SHAREHOLDER INFORMATION

Shareholders Name

Equities

%

Alibaba Group Holding Ltd. (Investment Management)

9,000,000 7.42%

Harding Loevner LP

6,998,040 5.77%

Fisher Asset Management LLC

2,764,345 2.28%

Genesis Investment Management LLP

1,783,661 1.47%

The Vanguard Group, Inc.

1,738,502 1.43%

BlackRock Fund Advisors

1,707,911 1.41%

Wells Capital Management, Inc.

1,547,782 1.28%

Platinum Investment Management Ltd.

1,402,555 1.16%

SSgA Funds Management, Inc.

968,639 0.80%

William Blair Investment Management LLC

837,226 0.69%

ECONOMIC ANALYSIS    

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Net revenues were $481.9 million, an increase of 28% year-over-year. Advertising and marketing revenues were $417.0 million, an increase of 25% year-over-year. Value-added service ("VAS") revenues were $64.9 million, an increase of 44% year-over-year. Net income attributable to Weibo was $166.5 million, an increase of 27% year-over-year, and diluted net income per share was $0.73, compared to $0.58 for the same period last year. Non-GAAP net income attributable to Weibo was $183.6 million, an increase of 26% year-over-year, and non-GAAP diluted net income per share was $0.80, compared to $0.64 for the same period last year. Monthly active users ("MAUs") were 462 million in December 2018, a net addition of approximately 70 million users on year over year basis. Mobile MAUs represented 93% of MAUs. Average daily active users ("DAUs") were 200 million in December 2018, a net addition of approximately 28 million users on year over year basis.

Fiscal Year 2018 Highlights    

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Net revenues totaled $1.72 billion, an increase of 49% year-over-year. Advertising and marketing revenues were $1.50 billion, an increase of 50% year-over-year. VAS revenues were $219.3 million, an increase of 43% year-over-year. Net income attributable to Weibo was $571.8 million, an increase of 62% year-over-year, representing a net margin of 33%, compared to 31% in 2017. Diluted net income per share was $2.52, compared to $1.56 in 2017. Non-GAAP net income attributable to Weibo was $624.2 million, an increase of 54% year-over-year, representing a non-GAAP net margin of 36%, compared to 35% in 2017. Non-GAAP diluted net income per share was $2.73, compared to $1.80 in 2017.

For the fourth quarter of 2018, Weibo's total net revenues were $481.9 million, an increase of 28% compared to $377.4 million for the same period last year. Advertising and marketing revenues for the fourth quarter of 2018 were $417.0 million, an increase of 25% compared to $332.3 million for the same period last year, primarily driven by an increase of $91.5 million, or 31% growth in advertising and marketing revenues from small & medium-sized enterprises ("SMEs") and key accounts. VAS revenues for the fourth quarter of 2018 were $64.9 million, an increase of 44% year-over-year compared to $45.1 million for the same period last year, mainly

attributable to the incremental revenues from the newly acquired live broadcasting business in the fourth quarter 2018. Costs and expenses for the fourth quarter of 2018 totaled $298.8 million, compared to $232.2 million for the same period last year. Other than the inclusion of marketing expenses related to barter transactions under the new revenue guidance as illustrated below, the increase in costs and expenses was primarily due to the incremental costs of revenue share incurred by the newly acquired live broadcasting business as well as the increase in personnel related costs and expenses. NonGAAP costs and expenses were $295.5 million, compared to $220.0 million for the same period last year. Income from operations for the fourth quarter of 2018 was $183.0 million, compared to $145.3 million for the same period last year. Non-GAAP income from operations was $186.4 million, compared to $157.5 million for the same period last year. Non-operating loss for the fourth quarter of 2018 was $1.9 million, compared to a non-operating income of $1.7 million for the same period last year, mainly resulted from the impairment on investments of $12.3 million for the fourth quarter of 2018. Income tax expenses were $14.9 million, compared to $17.0 million for the same period last year. Net income attributable to Weibo for the fourth quarter of 2018 was $166.5 million, compared to $131.0 million for the same period last year. Diluted net income per share attributable to Weibo for the fourth quarter of 2018 was $0.73, compared to $0.58 for the same period last year. Non-GAAP net income attributable to Weibo for the fourth quarter of 2018 was $183.6 million, compared to $146.0 million for the same period last year. Non-GAAP diluted net income per share attributable to Weibo for the fourth quarter of 2018 was $0.80, compared to $0.64 for the same period last year. As of December 31, 2018, Weibo's cash, cash equivalents and short-term investments totaled $1.83 billion. For the fourth quarter of 2018, cash provided by operating activities was $164.0 million, capital expenditures totaled $10.4 million, and depreciation and amortization expenses amounted to $5.8 million. Fiscal Year 2018 Financial Results For fiscal year 2018, Weibo's total net revenues were $1.72 billion, an increase of 49% compared to $1.15 billion in 2017. Advertising and marketing revenues for 2018 were $1.50 billion, an increase of 50% compared to $996.7 million in 2017. Advertising and marketing revenues from SMEs and key accounts were $1.38 billion, an increase of 51% compared to $912.1 million for 2017, while advertising and marketing revenues from Alibaba was $117.7 million, compared to $84.7 million for 2017.

VAS revenues for 2018 were $219.3 million, an increase of 43% compared to $153.3 million for 2017. The increase was mainly attributable to the growth in membership revenues and revenues from the live broadcasting business. Costs and expenses for 2018 totaled $1.11 billion, compared to $742.5 million for 2017. Other than the inclusion of marketing expense related to barter transactions under the new revenue guidance as illustrated below, the increase in costs and expenses was primarily resulted from the increase of sales and marketing expenses for user acquisition and channel investment, as well as the increase in personnel related costs and expenses. Non-GAAP costs and expenses were $1.06 billion, compared to $693.8 million for 2017. Income from operations for 2018 was $609.3 million, compared to $407.6 million for 2017. Non-GAAP income from operations was $662.2 million, compared to $456.2 million for 2017. Non-operating income for 2018 was $59.6 million, compared to $9.6 million in 2017, mainly resulted from the increase in interest income and fair value change of investments. Income tax expenses were $96.2 million, compared to $66.7 million for the same period last year. The increase was mainly attributable to higher profits generated in the fiscal year 2018. Net income attributable to Weibo for 2018 was $571.8 million, compared to $352.6 million in 2017. Diluted net income per share attributable to Weibo for 2018 was $2.52, compared to $1.56 in 2017. Non-GAAP net income attributable to Weibo for 2018 was $624.2 million, compared to $405.7 million in 2017. Non-GAAP diluted net income per share attributable to Weibo for 2018 was $2.73, compared to $1.80 in 2017.

INDUSTRY ANALYSIS At the moment, the debt-to-equity of Weibo Corporation (NASDAQ:WB) is high, standing at 73.79, a figure that is higher than the 34.18 average recorded by the industry. This means that the company is currently holding a debt level at 883.11 M. WB shares have a strong debt-to-equity ratio but their quick ratio which reads 4.00 is strong and might cause problems for them later in the future. Even though there was a rise of +42.62% in revenue, the company failed to succeed in outperforming the industry average of 19.08%. For the most recent quarter, the net income has jumped by +62.14%. This strength in their income has affected them and thus increased their earnings to $175.98 M. The 72.50% yoy growth of WB’s revenue has gone up that of the industry average by 16.52%. For the past 12 months, Weibo Corporation revenue has gone up by 55.98%. The sustained growth in their revenue has helped boost their earnings per share. In the fiscal year 2018, Weibo Corporation overcame its bottom line by hitting earning $1.57 per share compared to the $0.48 in 2017. The 12-month return on equity has significantly fallen to 24.86 in comparison to the same data for other companies in the same industry. This shows that there is a major weakness within the organization over the past one year. Comparing them to other companies in the industry and the overall Technology sector, the industry average is 17.87 while 13.93 is of the sector.WB total operating cash flow had jumped to $116.14 billion compared to $85.53 billion in the same quarter last year. Also, looking at the price to cash flow of the company and the industry average, the 105.97 ratio of the stock is higher than the industry’s 30.44. Weibo Corporation (NASDAQ:WB) has a price-to-earnings ratio of 115.44 which is higher than the 41.41 industry average at the moment. In addition to their unfavorable P/E ratio, Weibo Corporation has maintained a gross margin of 77.35. This shows whether the company has what it takes to effectively turn the revenue into profit. The company’s ROA is 17.35 when compared to 10.50 for the stocks operating in the same industry. This can be attributed to the strength recorded in the net income produced by total assets. Comparing it to other companies in the sector, Weibo Corporation ROE is above 13.93 that of both the sector average.

The operating profit margin for Weibo Corporation (WB) is 29.73%, a figure which is considered to be strong. It has gone 10.47 from the 0.18 over the past 5 years. In addition to this, their operating margin is 19.26 higher than the industry average. The net profit margin which stood at -4.01 on average in the past 5 years has jumped to 23.02 in the last 12 months. Added to that, this ratio has surpassed the industry net margin that stands at 3.43. Analysts meanwhile rate Weibo Corporation (NASDAQ:WB) as a buy. Still some above discussed indicators of the $15.82B company show strength while others show weakness. There is little evidence at the moment to justify the expectation of the WB shares to either perform positively or negatively when compared to other stocks. The primary strengths of Weibo Corporation can be witnessed in its increased revenue, growing earnings per share, higher return on equity, increased operating cash and high net margin. Subsequently, financial analysis have also identified some weak areas that includes high debt, relatively high P/E ratio, lower return on assets and low net margin.

FUNDAMENTAL ANALYSIS Financial Performance of WEIBO CORP from 2013 to 2017

(Values in U.S. Thousands) NEXT

12-2017

12-2016

12-2015

12-2014

12-2013

Sales

1,150,054

655,800

477,891

334,172

188,313

Cost Of Goods

231,255

171,231

141,960

83,599

59,891

Gross Profit

918,799

484,569

335,931

250,573

128,422

Operating Expenses

511,500

343,820

299,388

273,275

187,921

Operating Income $M

407,554

140,980

37,503

-22,103

-58,608

Other Income

9,557

-31,000

-723

-42,237

17,944

Pre-Tax Income

417,111

109,980

36,780

-64,340

-40,664

Income Tax

66,746

4,316

2,591

1,128

271

Net Income Continuous

350,365

105,664

34,189

-65,468

-40,935

Minority Interests

-2,225

-2,363

-556

-143

-1,145

RATIO ANALYSIS Annual Income Statement (values in 000's) Period 12/D31/2017 12/31/2016 12/31/2015 Ending: Liquidity Ratios Current 422% 215% 239% Ratio Quick 422% 215% 239% Ratio Cash 370% 142% 161% Ratio Profitability Ratios Gross 80% 74% 70% Margin Operating 35% 21% 8% Margin Pre-Tax 36% 17% 8% Margin

12/31/2014

436% 436% 334%

75% 7% 19%

Profit Margin Pre-Tax ROE After Tax ROE

31%

16%

7%

20%

35%

15%

6%

12%

30%

14%

6%

12%

TECHNICAL ANALYSIS

RELATIVE STRENGTH CHART

This technical indicator compares the relative strength or weakness of a stock. It measures the magnitude of rise or fall in stock price movements . 77.35 is the RSI value of WB stock. MOVING AVERAGE

Moving averages show the average price of WB stock over a set time period and help traders see the overall trend by smoothening out the daily variation in price movement. The 20 day moving average of $61.78 is above the last closing price of $72.07.

Weibo Corp Moving Average Convergence Divergence or MACD Two important concepts with respect to moving average convergence divergence or MACD are: crossovers and divergence. When the MACD rises above the signal line, it typically indicates a bullish trend and most likely the stock prices will go up. The Weibo Corp MACD indicator can be used to identify bullish and bearish trends for the stock.