With shares up roughly 150% year to date, Weibo (NASDAQ: WB) ranks among the year's best-performing tech stocks -- and it's one that growth-focused investors will likely want to keep an eye on. For those unfamiliar with the Chinese company, Weibo is a social media platform that has a number of similarities to Twitter -- among them, the core experience is built around 140-character messages and its management team is angling to make video a much bigger part of its business.
However, unlike Twitter, the company is already profitable, and it's delivering rapid sales and earnings growth. Take a look at the table below for a snapshot of its most recent quarterly performance:
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Taking a broader view, sales have climbed roughly 200% over the last three years and earnings have jumped 1,000%. Read on to learn about four metrics that will help you evaluate Weibo's performance going forward.
1. Active users
As with most social networks, having an active and growing user base is crucial to Weibo's success. Advertising accounted for roughly 88% of the company's sales last quarter and expanding its engaged user base is one of the company's clearest paths to making the platform more attractive for businesses to market on.
Last quarter saw the company's monthly active users (MAUs) increase roughly 28% year over year, while daily active users (DAUs) were up 26% over the prior-year period. The company has been able to continue delivering impressive user-base growth by partnering with Chinese hardware makers to embed its app on their mobile devices and by continuing to improve its content offerings. So long as its active user base is growing at a healthy clip, Weibo will be in good shape to deliver substantial top- and bottom-line gains.
2. Video growth
Facebook. Alphabet. Twitter. If you take a look at leading internet companies with a social-platform component, most seem to be gearing up for a future in which video plays a much bigger role, and Weibo is in the same boat. This quote from CEO Gaofei Wang (speaking through a translator) from the company's May 16 earnings call helps frame the importance of video for Weibo:
Weibo is partnering with a range of television channels and content producers in order to improve its video offerings and is also working to improve its recommended-video system and ad delivery. The June-ended quarter saw average daily video views increase 159% over the prior-year period, with the category accounting for between 18% and 20% of ad sales in the quarter,
3. EBITDA margin
Weibo has had great success at scaling its business in a cost-effective manner. Last quarter saw the company undertake a substantial marketing push to acquire new users, but, even so, expenses climbed just 38% year over year while revenues jumped 78%. Keeping track of the company's EBITDA margin will give a basic look at income as percentage of sales and help create a rough road map for earnings expectations as revenue grows.
Tying back into video growth, it's possible that EBITDA margin will drop as video becomes a larger revenue contributor, as professional content, hosting, and streaming tends to be cost-intensive, but that alone shouldn't be taken as a worrying indicator so long as revenue climbs enough to deliver healthy earnings growth.
Weibo's revenues are likely to continue to climb rapidly over the next several years. If the company's EBITDA margin also continues to climb, there's a good chance shareholders will see substantial capital appreciation.
4. Other revenues
In addition to advertising, Weibo generates revenues from services on its platform including account verification, business features, data licensing, and online payment processing. These offerings make up its value-added-services segment, which saw sales increase 78% year over year in the last quarter.
Weibo lost its early competition with Tencent Holdings' WePay to emerge as China's dominant social-based online payment system, but that doesn't mean that Weibo Wallet can't be a growth driver for the company. At the end of the last quarter, over 70 million Weibo accounts had activated the payment service, and the combination of growth in the overall online-payment category and Weibo's expanding user base suggests that the company still has opportunities in the highly profitable space. While segment-specific margins aren't available, it's probably safe to assume that the company's other businesses are even more profitable than its ad category.
The other revenues segment accounted for only around 12% of the company's top line in the last quarter, but Weibo expects that the associated products will play a key role in its growth engine and has indicated that the segment should see increased profitability. Performance for Weibo's non-advertising component could also provide indicators as to how businesses view the service's viability as a customer relations management platform and whether users are warming to features outside of the core social product, so shareholders should monitor the segment even though advertising is the bigger sales driver.
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