It's been a sad week for Weibo Corporation (NASDAQ:WB), who've watched their investment drop 19% to US$43.55 in the week since the company reported its quarterly result. Revenues of US$468m were in line with forecasts, although earnings per share (EPS) came in below expectations at US$0.64, missing estimates by 3.5%. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent forecasts to see whether analysts have changed their earnings models, following these results.
After the latest results, the 22 analysts covering Weibo are now predicting revenues of US$1.99b in 2020. If met, this would reflect a notable 12% improvement in sales compared to the last 12 months. Earnings per share are expected to rise 7.8% to US$2.71. Before this earnings report, analysts had been forecasting revenues of US$2.06b and earnings per share (EPS) of US$2.91 in 2020. It's pretty clear that analyst sentiment has fallen after the latest results, leading to lower revenue forecasts and a small dip in earnings per share estimates.
It'll come as no surprise then, to learn that analysts have cut their price target 5.2% to US$50.08. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Weibo analyst has a price target of US$70.00 per share, while the most pessimistic values it at US$39.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
It can also be useful to step back and take a broader view of how analyst forecasts compare to Weibo's performance in recent years. It's pretty clear that analysts expect Weibo's revenue growth will slow down substantially, with revenues next year expected to grow 12%, compared to a historical growth rate of 37% over the past five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 15% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Weibo.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by the latest results, leading to a lower estimate of Weibo's future valuation.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Weibo going out to 2022, and you can see them free on our platform here..
We also provide an overview of the Weibo Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.