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Weibo (WB) Stock Hits All-Time High Ahead of Q2 Earnings

Shares of Weibo WB skyrocketed to a new all-time high on Monday, just days before the company is set to report its second-quarter earnings.

Weibo, which is often referred to as the Chinese Twitter TWTR, has more than doubled its share price since the start of the year. The company climbed from $40.60 a share at the end of December 2016 to the nearly $86 per share it rests at today.

Shares of Weibo were up 10% in afternoon trading on Monday, with the company reaching a new 52-week and all-time intraday trading high of $86.87 per share. Weibo is currently a Zacks Rank #3 (Hold) and scored a “B” grade for Growth in our Style Score system.

Chinese internet and media company SINA Corporation SINA, which owns Weibo, was up 4.64% on Monday. E-commerce power Alibaba BABA, which holds a reported 31.5% stake in the company, saw its stock price gain 2.98%.

The Chinese social media powerhouse is set to announce its second quarter earnings before the opening bell on Wednesday, August 8. Now, let’s take a further look into the company’s current financials and growth opportunities.

Recent Growth

Weibo’s net revenues jumped 67% year-over-year to $199.2 million in the company’s first fiscal quarter of 2017. Massive advertising and marketing revenues, which climbed 71% from the year-ago period to $169.3 million, helped to spur the company’s growth.

Weibo’s annual sales have grown 43% over the last three years, and over the last three quarters, the company’s earnings grew by an average of 179%.

Wall Street analysts expect Weibo to post earnings of $1.51 per share for full-year 2017, which would mark an 84% jump from last year. The company is also projected to report $1.05 billion in revenues, up 60% from the year-ago period.

User Growth & More

Based on Weibo’s May report, the Chinese mircoblog is now bigger than Twitter. The company boasts 340 million active monthly users, which marks a 30% gain year-over-year—91% of new users were mobile-based. Twitter has around 328 million monthly active users. On top of that, Weibo’s daily active users climbed 28% from the year-ago period to 154 million.

An estimated 731 million people use the internet in China and more than 90% of them have access via smartphones, according to a China Internet Network Information Centre report. China added 42.99 million new internet users in 2016.

The massive overall growth in Chinese internet use has—and might continue to—help Weibo expand its reach. Weibo is already the most popular Chinese microblogging company, and the platform is reportedly used by most mainland Chinese news outlets and TV stations.

Sina recently partnered with the PGA of America to help grow golf in China through greater web and social media exposure, and Weibo will be used to help promote content. The company worked with the NFL last season to live-stream a few games on its Twitter-like platform.

In March, Weibo partnered with the NBA on a multi-year deal. The social media platform will provide daily game highlights, statistics, photos, and original programming. Weibo will "become NBA China's official social media platform."

Government Intervention

Weibo has been able to grow quickly because some of the biggest social media companies are barred from entry into one of the largest markets in the world. The Chinese government blocks or regulates the use of many apps and websites, including Twitter, Facebook FB, Google GOOGL, and YouTube. But Weibo and its platform have also felt the reach of the government.

The company’s stock price fell in late June after reports surfaced that the Chinese government was set to further regulate web use. The Chinese government will stop all audio and video content that deals with political matters from being published on the platform, especially matters that the government finds sensitive.

Weibo was told to stop streaming video and audio content that was “not in line with national audiovisual regulations and propagating negative speech,” according to the Financial Times.

However, Wall Street analysts aren’t extremely worried that the regulations will hurt the company’s bottom-line because Weibo’s most popular categories are entertainment, celebrity news, and fashion, according to Forbes.

Want to learn more about Chinese internet regulation? Check out the latest episode of the Zacks Tech Talk Tuesday podcast: China's Web Regulations and Chinese Internet Stocks.

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