On Friday, HSBC revised its price target for Weibo Corp (NASDAQ:WB), a leading social media platform, reducing it to $9.80 from the previous $13.60, while keeping a Hold rating on the stock. The adjustment follows a detailed review of the company's financial outlook amid a challenging macroeconomic environment.
Weibo is expected to face headwinds due to a combination of factors, including a tough macroeconomic climate that could lead to slower year-over-year growth and ongoing consumption downgrades. These challenges are anticipated to impact the company's performance in 2024. As a result, HSBC has lowered its revenue estimates for Weibo by 3% for 2024 and 4% for 2025.
The company's margins are also under threat as Weibo plans to increase its investments in user acquisition and vertical content to remain competitive in the market. This strategic move has led HSBC to make a more significant cut in its earnings projections for Weibo, reducing them by 11%.
Despite the downward revisions, HSBC noted Weibo's commitment to shareholder returns, highlighting the company's intention to continue dividend payments of $200 million per year in 2023 and 2024, which translates to a dividend yield of 8-9%. However, the firm cautioned that the subdued revenue and earnings outlook could persist as a drag on the share price.
After considering the impact of withholding taxes on dividend payments and introducing estimates for 2026, HSBC concluded that the new target price of $9.80 reflects a fair valuation. The firm cited Weibo's price-to-earnings ratio of 5.5x for 2024 estimates but also pointed to the negative earnings growth expected this year as a basis for maintaining the Hold rating.
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