Shares of Weibo (NASDAQ: WB) plummeted nearly 40% last month, according to data provided by S&P Global Market Intelligence, following the company's first-quarter report.
Weibo's revenue rose 14% year over year to $399 million. The Chinese social media network's monthly active users (MAUs) grew 13% to 465 million, while average daily active users (DAUs) increased by 10% to 203 million.
In turn, Weibo's adjusted (non-GAAP) net income increased 14% to $128.5 million, or $0.56 per share. That was above the average analyst estimate for adjusted earnings per share of $0.53.
However, Weibo issued second-quarter revenue guidance of $427 million to $437 million, representing a year-over-year increase of 7%-10% on a constant currency basis. That's well below the roughly $482 million analysts had been expecting.
Trade war ramifications are weighing on Weibo's results. Image source: Getty Images.
The trade war between China and the U.S. has led to a slowdown in the Chinese ad sales market. It's an industrywide trend, with other digital advertising titans such as Baidu also suffering from reduced demand for their services. Investors, who have grown accustomed to years of strong growth, have reacted by selling off these Chinese digital ad leaders.
But this trade war-related pullback in ad spending is temporary. The U.S. and China will likely reach an accord eventually, and even if they don't, China's digital ad market is still poised for solid long-term growth. Only about 60% of China's massive 1.4 billion population is currently online, leaving more than 500 million potential future internet users. Moreover, income levels in China are likely to continue to rise, which should boost demand for online goods and services. All of these trends bode well for China's digital ad leaders. And investors may be beginning to once again focus their attention on these longer-term trends; Weibo's shares are already up more than 6% so far in June.
More From The Motley Fool
- 10 Best Stocks to Buy Today
- The $16,728 Social Security Bonus You Cannot Afford to Miss
- 20 of the Top Stocks to Buy (Including the Two Every Investor Should Own)
- What Is an ETF?
- 5 Recession-Proof Stocks
- How to Beat the Market