Goldman Sachs' research report states that Weibo's second quarter performance roughly meets the bank's expectations, but exceeds the market's expectations. They point out that after attending the company's earnings conference, the management has a more cautious outlook on advertising revenue for the second half of this year and beyond, given the weak macro environment and the contraction of consumer brand advertising budgets. The management expects stable advertising revenue from cosmetic brands in the fourth quarter of this year, which has provided some reassurance for the bank.
The bank points out that excluding the impact of exchange rates, advertising revenue for the third and fourth quarters of the company is expected to decline by 4% and 5% respectively compared to the same period last year, even with the slight boost from the Paris Olympics. They forecast that advertising revenue will remain flat in 2025 and 2026, leading to a downward revision of the bank's revenue forecasts for 2024 to 2026 by 5%, 8%, and 11% respectively. They also revised the earnings per American depositary share (EPADS) forecast downward by 2%, 7%, and 10%.
The bank also suggests that the management plans to continue distributing dividends in cash over the next few years. They believe that a higher dividend payout ratio or improved earnings per share outlook is necessary to improve the current stock price performance. The bank has lowered the target price for Weibo's H-shares from HK$78 to HK$73 and maintains a 'neutral' rating.
