WB Stock to Gain More from Evolving Product Strategy
Today’s stock represents another of my favorite investing strategies: playing the mobile revolution taking place around the world. At the moment, the attention seems to be on China, as a huge consumer class comes on board to spread the usage of mobile Internet. By investing in the stocks that gain from this trend, investors could reap triple-digit gains in a few years’ time.
Today’s stock, Weibo Corp (ADR) (NASDAQ:WB), is a social media platform for people to post, share, and explore Chinese-language content. The company provides the means for people and companies to publicly express themselves and stay connected with each other.
But haven’t we heard this before? Yes, this is because Weibo is a breezy mix of Twitter Inc (NYSE:TWTR) and Facebook Inc (NASDAQ:FB). But it is building itself into a unique platform by adding different features. The platform is continuously evolving, and its high-growth potential points toward higher returns for Weibo stock in the future.
Primarily it is a microblogging platform that can be used for posting multimedia as well as short videos. The platform has not only been attracting eyeballs, but also converting them into profits, which is what is making WB stock fly higher.
Despite having a large user base, the potential is huge for Weibo stock to gain in the future as more and more of the population gets access to the Internet.
As per the report from the China Internet Network Information Center (CNNIC), as of December 2016, the number of Internet users in China had reached 731 million, which is equivalent to the population of Europe. The Internet penetration stood at 53.2%, which is 3.1% points higher than the world average. But most importantly, the number of mobile Internet users in China reached 695 million, or about 95% of the total. This represents an annual growth rate exceeding 10% for three consecutive years. (Source: “Statistical Report on Internet Development in China,” China Internet Network Information Center, last accessed July 4, 2017.)
As the consumption and mobile Internet usage increases in China, companies like Weibo stand to reap tremendous gains. This is already evident from the stellar results posted by the company.
The social media company posted better-than-expected results for the first quarter last month. Weibo reported that it has 340 million monthly active users in March, which is an increase of 30% year-over-year. It further added that the average daily active users reached 154 million, an increase of 28% year-over-year.
The strong user growth and engagement were given a boost by the various marketing campaigns and live streaming of events undertaken in the first quarter.
Weibo has been successful in monetizing its user base, which is another reason that Weibo stock has been scaling new highs. Its customers continue to increase their ad spending on Weibo on account of its strong advertising product offerings. The content ecosystem has been becoming better and its multimedia features are becoming richer. It is becoming a primary distribution channel for top publishers and influencers who share content on the platform.
Moreover, as video content consumption increases on Weibo, an increasing number of customers are willing to try video ads. In the first quarter, the number of video ad customers went up by 50% from the previous quarter. The company is focused on developing new video ad products, which means more upside for WB stock.
The CEO of Weibo, Gaofei Wang, attributed the success to the company’s aggressive focus on building the best social media experience in the country. Moreover, the management is confident that the strong momentum will continue as the platform becomes better for the mobile, social, and video environment.
Hence, Weibo may have been a clone of Twitter in the initial days, but it has evolved and performed better than the latter. The following chart shows the phenomenal run of Weibo stock, which is up almost 64% year-to-date and 133% over the past year.
Chart courtesy of StockCharts.com
The Bottom Line on Weibo Stock
As Weibo continues to grow, there is a lot of room left for the company to monetize its user base, which has been showing impressive growth along with its products and monetization strategies. The upbeat Q1 results came about on the back of increased user engagement, which is likely to improve in the coming quarters.
Weibo is expected to expand its user base further as it plans to deepen its strategic cooperation with its partners like smartphone manufacturers and variety TV show producers.
Moreover, as Weibo begins to make video the central focus of its future products, both user traffic and engagement are likely to go up. Investors could add WB stock on any sign of weakness as the new strategy means more advertising dollars for the company and more upside for the stock.