I don’t often say this, but I’m delighted that one of my top internet stocks is down today. In this increasingly challenging investing environment, this represents a rare buying opportunity.
As I write this, shares of Weibo Corp. (WB) are falling after Chinese regulators asked the social media platform to shut down video and audio streaming services that are violating state regulations. The official claim from the Chinese government is that Weibo Corp. is operating its video and audio streaming services without the required license. Current Chinese regulations require a license to upload videos about politics and public affairs. However, Weibo is just one of the Chinese government’s targets; it has also gone after other major internet platforms such as iFeng and ACFUN.
As far as I’m concerned, this is just a slap on the wrist for Weibo. The statement didn’t actually specify what Weibo did to trigger the freeze. An analyst at Jefferies also noted that all video content on Weibo is hosted through Miaopai; in turn, Miaopai’s parent company Yixia Technology does have the required license.
This story is still developing, so I’ll be keeping a close watch on any further changes. In the meantime, though, I consider this to be a tremendous buying opportunity. The fact is that Weibo still has excellent forecasted sales and earnings.
For the current quarter, the analyst community is forecasting 68% annual sales growth and 125% earnings growth. Over the past 60 days, analysts have revised the consensus EPS estimate 24% higher. Weibo has a strong track record of earnings surprises, and I expect it surpass expectations with its second-quarter report in August.
For FY 2017, the consensus estimate calls for 60% sales growth and 84% earnings growth. WB also trades at a reasonable multiple of 32 times forecasted earnings, which is right around the industry average.
For these reasons and more, WB is an A-rated Strong Buy. If you have some extra cash on hand, I recommend that you buy WB shares on the pullback.