Weibo (WB) Ad Load Could Be Growth Lever For Multiple Quarters - Piper

Weibo (NASDAQ: WB) posted strong Q3 results, 2.5% ahead of the Street with Q4 guidance also above the Street. Thematically there are two current keys to the story, Piper Jaffray analyst Gene Munster:

1) the company should continue to see steady margin expansion as revenues ramp

2) the long-term revenue picture is strong given low ad loads compared to US social media companies.

Weibo reported Q3 revenue of $124.7M, 2.5% ahead of the Street at $121.6M and prior guidance for $120-123M. PF EPS was $0.10 vs the Street at $0.03. Monthly active users (MAUs) were 222 million, up 33% y/y vs 36% in Q2 and 38% in Q1. Daily active users (DAUs) were 100 million, up 30% y/y vs up 34% y/y in Q1 and Q2.

Weibo guided Q4 revenue to $146-149M, slightly ahead of the Street's $147M.

The analyst expects WB to grow revenue in the 30-40% range over the next several quarters and considering WB's Q4 guide, he raised Q4 revenue by 7% and 2016 revenue by 4%.

Mobile contributed 64% of total revenue in Q3 vs 62% in Q2, 58% in Q1. Mobile revenue grew 136% y/y in Q3 and accelerated from 134% y/y in Q2.

Weibo management noted that ad load is currently around 2.3%. We note that Facebook has talked about a 5% ad load in the past and have noted an ad load closer to 10% on mobile in our tracking. These US parallels suggest that Weibo can at least double ad load over the next few years.

No change to Overweight rating and PT increases to $23 from $22.

For an analyst ratings summary and ratings history on Weibo Corp click here. For more ratings news on Weibo Corp click here.

Shares of Weibo Corp closed at $17.67 yesterday.

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