Weibo Corp (NASDAQ:WB) is in dire need of a new catalyst if it is to continue powering high and erase all the losses accrued in 2020. The upward momentum appears to have lost steam in recent weeks, with the stock pulling lower after threatening to power through 2020 highs.
User Growth
However, the pullback appears to be a minor correction given the underlying solid fundamentals that continue to affirm the Chinese social media heavyweight long term prospects. The last few months have been busy for the company as well as investors.
The company has posted impressive first quarter and second-quarter financial results that affirm growth in the core business. Encouraging progress on users' monetization on the social network has all but continued to strengthen the stock’s sentiments among investors.
Robust user growth at the back of increased engagement levels also supports long-term prospects, especially in attracting ad spend. With The COVID-19 pandemic in China brought under control, a solid recovery on the brand advertising business looks set to continue heading into the year-end.
Growing Ad Business
Weibo is well-positioned to benefit as more people and businesses embrace its differentiated social marketing solutions to connect with a broader audience. The integration is poised to enhance engagement levels crucial to strengthening the ad business.
The Chinese social media company is in the process of enhancing its ad performance and ad business to strengthen the ad business further. Likewise, the company plans to capture a higher wallet share in the performance ad market.
In the second quarter, the company’s ad business took a significant hit, which explains the 10% decrease in revenues. While the pandemic's adverse impact has subsided, the company remains well-positioned to report impressive numbers in the third quarter. However, revenues are expected to come lower 5% to 7% from last year's same period numbers as most businesses are yet to recover from the pandemic fully.