Tuesday, September 29, 2020

Weibo Among Top Gainers on Monday After Q2 Print

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News shaping
the markets today

     

What’s happening: Shares of Weibo Corporation rose sharply on Monday after the Chinese company reported better-than-expected results for its second quarter.

What happened: Although Weibo reported a decline in quarterly revenues, its overall results were strong enough to make investors happy.

Meanwhile, Weibo’s parent, Sina Corp joined the list of Chinese companies to exit US stock exchanges, amid growing scrutiny by regulators.

How were the results: Although Weibo reported a decline in both sales and adjusted earnings for the second quarter, both metrics exceeded expectations.

  • Total net revenue contracted by 10% to $387.4 million, from $431.8 million in the same quarter last year, but exceeded the consensus view of $379.9 million.
  • Non-GAAP net income declined to $114.5 million, or 50 cents per share, versus $156.4 million, or 68 cents per share in the year-ago quarter. This too surpassed the consensus estimate of 46 cents per share.

Why it matters: Weibo, the largest social media platform in China, is known for its microblogging website Sina Weibo. The Chinese microblogging site is often compared to Twitter, although Sina Weibo is newer and growing much faster than its US-based rival.

Weibo’s revenues and earnings were hurt by a decline in ad spend, the largest contributor to the company’s business. On the other hand, users remained active on the platform amid restrictions and social distancing measures. In fact, Weibo’s user base expanded during the quarter, with MAUs (monthly active users) growing by a whopping 37 million to 523 million and DAUs (daily active users) increasing by 18 million to 229 million.

Although ad spend declined versus last year, Weibo witnessed a recovery in its business compared to the prior quarter, as China acted promptly to curtail the covid-19 outbreak. CEO Gaofei Wang said in a statement, “With the covid-19 pandemic situation in China largely brought under control, we are glad to see the solid recovery of our brand advertising business in the second quarter, with more brands embracing our differentiated social marketing solutions to connect with broader audience on Weibo.”

Investor sentiment remained intact although Weibo issued a weak forecast for the third quarter. Management guided to a 5%-7% decline in revenue, versus market expectations of a 1.7% downturn.

Meanwhile, Sina Corp joined various Chinese firms moving out of US stock exchanges, amid tensions between the two countries and concerns over the prospects of the world's largest economy.

Sina Corp announced it will be taken private in a transaction valued at $2.6 billion with CEO Charles Chao. The offer price of $43.30 a share represents a premium of 18% to the stock’s closing price on July 2, the day before the company received the earlier offer of $41 a share.

How shares responded: Weibo’s shares spiked 7.4% to close at $34.96 on Monday following the announcement of quarterly results. The stock has gained around 3% over the past three months. Shares of Sina also rose by 5.9% to close at $ 42.55 following the go-private announcement.

What to watch: Investors will monitor Weibo’s advertising revenues and Sina’s deal to opt out of the US stock market

The Markets Today

     

The euro will be in focus today, ahead of a basket of economic reports scheduled for release in the day.

Context: The EUR/USD moved higher on Monday with the euro being supported by weakness in the US dollar and comments from ECB’s President Christine Lagarde.

Details: The euro surged against the US dollar with weakness in the greenback providing support to the EUR/USD pair. Equities also recorded massive gains following reports of progress in China. Market sentiment was also driven by renewed hopes of a Brexit trade deal.

Despite all the support, the euro came under pressure later in the day on comments from ECB’s President. Testifying before the ECON (European Parliament Committee on Economic and Monetary Affairs) on Monday, Christine Lagarde said that deflation in the eurozone is likely to persist “over the coming months.” Last month, the region slipped into deflation for the first time in four years.

What to watch: Investors await a basket of economic reports from the Eurozone, including the economic sentiment indicator, consumer confidence indicator, consumer confidence price trends, industry confidence indicator and services confidence indicator.

The economic sentiment indicator is expected to rise to 89 in September, from 87.7 in August, while consumer confidence is estimated to improve to -13.9, from last month’s reading of -14.7. Analysts expect industry confidence to rise to -10 in September, while the services confidence indicator is expected to improve to -15.7.

Covid-19 continues to remain in focus, with global confirmed cases surging past the 33 million mark.

Other Markets: US indices closed higher on Monday, with the Dow Jones, S&P 500 and Nasdaq 100 up by 1.51%, 1.61% and 1.87%, respectively.

Support & Resistances
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market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Italy’s producer prices, UK’s consumer credit, mortgage approvals and mortgage lending, South Africa's unemployment rate and SACCI business confidence index, Spain's industrial confidence indicator, Germany’s inflation rate, Canada’s producer prices and raw materials price index, Brazil’s Federal tax revenues and net payrolls, Russia’s business confidence, Argentina’s current account as well as the US goods trade balance, wholesale inventories, Redbook index, S&P CoreLogic Case-Shiller home price index, CB consumer confidence and API crude oil stockpiles.