A big jump in engagement during the Olympics showed the rising strength of Weibo (WB), China's Twitter (TWTR), says investment bank M Science, which on Thursday launched coverage of the stock with an above-consensus forecast and positive long-term view.
This quarter "our tracking of Weibo suggests that user engagement on the Weibo platform increased dramatically in early August, likely driven by the Olympic Games," M Science analyst Henry Guo wrote in a research report published late Thursday. "For example, the number of likes on popular Weibo postings almost doubled in the first two weeks of August vs. June, reflecting Weibo's leading position among China's social networks for Internet users following social events."
Weibo stock climbed 5.4% to 48.38 on the stock market today, hitting an all-time high for the third day this week. Weibo stock has nearly doubled in the past three months. The stock is well extended from a cup-with-handle buy point of 19.20, touched April 6. It triggered the eight-week hold rule after surging more than 20% in less than three weeks from its breakout, but still it keeps rising.
Weibo parent Sina (SINA) is also faring well. Sina rose 3% to 73.46, also hitting a new high and continuing a strong rally since its earnings report earlier this month.
IBD'S TAKE: Weibo sports a highest-possible IBD Composite Rating of 99. That puts the company among the top 1% of all stocks in such key metrics as earnings and revenue gains, which is why CRs are crucial to tracking top stocks. Alibaba, too, sports a 99 CR, and it's currently in the IBD 50 list of top performers.
Its advertising related to China e-commerce leader Alibaba Group (BABA) is another big plus, says Guo.
"We believe the Alibaba-related advertising business should also benefit from increasing user traffic," he wrote. He said the strong user trends will help Weibo's advertising overall.
On Aug. 9, Weibo posted a Q2 beat that sent shares rising 12.5% the next day. EPS skyrocketed 220% to 16 cents a share from 5 cents in the year-earlier quarter, while both revenue and average daily users jumped 36%.
But on Aug. 15, Bloomberg reported that the number of short sales, bets that the stock will fall, also have risen to record levels.
Alibaba stock rose 1.2% to 95.06 consolidating after hitting a 19-month best on Aug. 15. Chinese mobile gaming portal NetEase (NTES) leapt 4.4% to 217.71, setting a new high of 218.77 intraday.
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