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Weibo Scores A $70 Price Target As JPMorgan Resumes Coverage At Overweight

WB - Weibo Scores A $70 Price Target As JPMorgan Resumes Coverage At Overweight

JPMorgan has assumed coverage of Weibo Corp (ADR) WB 0.25% with an Overweight rating and a June '17 price target of $70, saying the company is a key beneficiary of Key Opinion Leader (KOL) economy, and its live broadcasting monetization potential remains overlooked.

KOLs refer to people followed by a large online audience, "ranging from celebrities to the broad masses of consumers and a proliferation of the latter over the past 18 months."

The brokerage said the shifting of Weibo's traffic from celebrity-oriented big KOLs three to four years ago to more grass-roots-oriented small- and medium-sized KOLs over the past one to two years have created new business models, making it feasible for smaller KOLs to monetize fan bases.

For Weibo, the transition should aid Weibo's top-line growth through ads, value-added services and revenue-sharing. Weibo has accounts of about 36,000 small- and medium-sized KOLs.

"We note most of the KOLs in China choose to interact with and monetize their fan bases through their Weibo accounts regardless of where they become famous," analyst Alex Yao wrote in a note.

"We believe the monetization potential of such a new economy will gradually unfold in the next few years and drive revenue growth acceleration (JPMe FY16-19E CAGR of +53 percent vs. consensus +31 percent)," Yao continued.

Yao recommends investors own Weibo for positive earnings revisions before live broadcasting monetization unfolds. The analyst expects FY16/17/18 adjusted EPS of $0.70/$1.37/$2.21 and revenue of $635 million/$1 billion/$1.56 billion.

"Our base-case scenario suggests live broadcasting could generate an incremental 15 percent/52 percent upside to FY18E revenue and non-GAAP net profit. Our 2017/18 EPS forecasts are 26 percent/36 percent higher than consensus as a result," Yao elaborated.

At time of writing, ADRs of Weibo fell 2.88 percent to $46.17.

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Aug 2016JP MorganAssumesOverweight
Aug 2016Goldman SachsMaintainsNeutral
Aug 2016CitigroupInitiates Coverage onBuy

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