Weibo Corp (ADR) (WB) Shares Surge Again

Weibo Corp (ADR) (WB) Shares Surge Again
By Julien GONG Min ( [CC BY 2.0], via Wikimedia Commons

Weibo Corp (ADR) (NASDAQ:WB) appears to be following in the footsteps of its U.S. counterpart Twitter Inc (NYSE:TWTR)—at least for now. As Forbes staff writer Brian Solomon notes, some stocks which soar on their opening day, as Weibo did, are prone to a big-time correction. However, investors remain enthusiastic about the Chinese micro-blogging company.

Weibo’s market cap bigger than its parent company

Weibo Corp (ADR) (NASDAQ:WB)’s skyrocketing share price has actually pushed its market capitalization up to more than $4.6 billion, which is bigger than that of SINA Corp (NASDAQ:SINA), which is its parent company. However, it is still less than a fifth the size of Twitter Inc (NYSE:TWTR)’s market cap, which is trading at a multiple of approximately 27 times, compared to Weibo’s 14 times, which is closer to Facebook Inc (NASDAQ:FB)’s and LinkedIn Corp (NYSE:LNKD)’s multiples.

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Weibo: the next Twitter?

One of the main reasons investors have been so excited about Weibo Corp (ADR) (NASDAQ:WB) is because of its rapid growth. The Chinese company’s revenue rose 190% last year, climbing to $188 million. This year, analysts believe it will hit $400 million. However, as Brian Nichols of The Motley Fool notes, the company could follow one of two different paths.

At the current growth rate, Weibo Corp (ADR) (NASDAQ:WB) is actually growing a lot more quickly than Twitter Inc (NYSE:TWTR), which only grew 110% last year and could grow 86% this year. When looking at projections, Weibo’s valuation looks cheap at 10 times the expected sales ratio, while Twitter’s is 20 times. Of course right now it’s still early to be able to tell if even Twitter Inc (NYSE:TWTR) itself will continue its pace of rapid growth.

Or the next Renren?

On the other hand, Renren Inc (NYSE:RENN)’s valuation declined by almost 80% over the three years after its initial public offering. The company’s valuation fell from over $7 billion to less than $1.25 billion. The company was seen as China’s Facebook Inc (NASDAQ:FB). In 2010, Renren posted $76.5 million in revenue, which was a 64% year over year growth rate.

In the last quarter though, it posted a 29% decline in revenue. In addition, the social network projected a 40% decline in first quarter revenue. Also its monthly unique logins have declined rapidly to only 45 million in the fourth quarter of 2013 from 56 million in 2012.

This presents an interesting gamble for Weibo Corp (ADR) (NASDAQ:WB) investors. Are they doling out cash for what will be the next Renren Inc (NYSE:RENN)?

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