Weibo Corporation WB delivered fourth-quarter 2018 adjusted earnings of 80 cents per share surpassing the Zacks Consensus Estimate of 70 cents. The figure also surged 25% year over year.
Revenues of $481.9 million increased 27.7% from the year-ago quarter and marginally beat the Zacks Consensus Estimate of $481.5 million.
Investors should note that fourth-quarter 2018 results are reported under the new revenue standard ASC 606, while fourth-quarter 2017 results were reported under the revenue standard ASC 605.
Under ASC 605, revenues were $460.8 million in the reported quarter.
Weibo Corporation Price, Consensus and EPS Surprise
Weibo Corporation Price, Consensus and EPS Surprise | Weibo Corporation Quote
Advertising and marketing revenues (86.5% of total revenues) increased 25.5% year over year to $417 million due to revenue growth from Small and medium-sized enterprises (SMEs) and key accounts (KA).
Value-added service (VAS) revenues (13.5%) increased 43.7% year over year to $64.9 million driven by revenue growth from live broadcasting business that was acquired in fourth-quarter 2018.
Together SMEs and KA revenues (92.4% of advertising and marketing revenues) increased 31% year over year to $385.5 million. KA increased 62% year over year to $205.9 million and SMEs increased 8% year over year to $179.6 million.
KA revenues increased on account of higher average revenue per advertiser (ARPA) and growth in ad measurement service offerings given in collaboration with Alibaba BABA. However, SMEs revenue growth was affected owing to regulatory concerns and pricing pressures.
However, revenue contribution from Alibaba (7.6%) declined 17.7% year over year to $31.6 million owing to higher ad load in fourth-quarter 2017.
In the reported quarter, monthly active users (MAUs) were 462 million. Weibo added 70 million new users from the year-ago period. The increase was due to availability and consumption of premium content on Weibo’s platform. Notably, mobile MAUs were 93% of total MAUs.
Additionally, average daily active users (DAUs) were 200 million, an increase of 28 million new users from the year-ago period. Moreover, traffic of hot search and topic products increased in double and triple-digit percentages, respectively.
Weibo increased the scope of content creation for creator’s in short video products by adding more verticals. This resulted in increased adoption of the product, which is a positive. The company is also collaborating with TV and smartphone manufacturers in the area of content to bolster user base and engagement levels.
Sales and marketing and general and administrative expenses increased 51.6% and 34.1% year over year to $140.5 million and $12.9 million, respectively, owing to increase in personnel related costs and cost of revenues related to live broadcasting business acquisition.
Additionally, product development expense increased 8% year over year to $62.5 million. Moreover, non-GAAP total costs and expenses increased 34.3% year over year to $295.5 million.
Adjusted EBITDA was $192.1 million, up 18.7% year over year. However, adjusted EBITDA margin contracted 300 basis points (bps) year over year to 39.9%.
Weibo’s non-GAAP operating income was $186.4 million up 18.3% year over year. However, operating margin contracted 300 bps year over year to 38.7%.
Balance Sheet & Cash Flow
Weibo exited the reported quarter with cash and cash equivalents of $1.23 billion compared with $792.5 million as of Sep 30, 2018.
Cash flow from operating activities was $164 million in the reported quarter as compared with $122.1 million in third-quarter 2018.
Weibo expects net revenues to be in the range of $395-$405 million, representing year-over-year growth of 20.5% to 23.5%, on a constant currency basis.
In the first half of 2019 the company’s ad revenues may be negatively impacted on account of uncertain macro environment from sectors like IT, automobile and entertainment. Additionally, SMEs ad revenue growth is anticipated to bear the brunt of uncertain macro environment and regulatory concerns.
Zacks Rank & Stocks to Consider
Currently, Weibo carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader computer and technology sector include CommVault Systems, Inc. CVLT and eGain Corporation EGAN, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for CommVault and eGain is projected to be 15.8% and 30% respectively.
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