Another day, another triple-digit swing in the Dow. Lately, the stock market has been obsessed with the possibility of an interest rate hike. This has been the source of recent volatility.
However, I strongly believe that the Federal Reserve will not be raising key interest rates this month. The Fed remains “data dependent,” and recent economic data as well as an extremely bearish Beige Book will weigh on Fed officials minds at next week’s Federal Open Market Committee (FOMC) meeting.
So I’m viewing any and all pullbacks as excellent buying opportunities. In particular, there’s one Chinese internet company that I recently added to my Blue Chip Growth and Family Trust that is an excellent buy right now…
Weibo Corp. (WB) is popularly known as “China’s answer to Twitter.” Weibo is a social media company that allows Chinese users to express themselves, connect with others, discover Chinese-language content and use push notifications on their mobile devices. Weibo also offers online games and mobile apps. Weibo has experienced tremendous growth since its launch in 2010. The social media platform had 282 million monthly active users at the end of June 2016, a 33% increase over June 2015. Of those, nearly 90% are mobile users.
This translated to strong second-quarter results, which walloped analysts’ estimates. Weibo reported that revenue increased 36% year-over-year to $146.9 million, topping estimates for $141.15 million. Net income surged 516% year-over-year to $25.9 million, while earnings per share soared 220% year-over-year to $0.16. Analysts were expecting $0.11 per share, so Weibo posted a 45.5% earnings surprise.
For the third quarter, Weibo is forecasting sales between $168 million and $173 million, which represents 34.7% to 38.7% annual sales growth. After the stunning Q2 report, analysts increased their Q3 EPS estimate by 25%.
For the current quarter, analysts are calling for 100% earnings growth and 38.1% sales growth. However, given Weibo’s earnings surprise history, I expect it to do even better when it next reports in November. In the meantime, I consider WB an A-rating Strong Buy.