Social networks and their stocks

Twitter (NYSE: TWTR) and Weibo (NASDAQ: WB) are often considered comparable social networks. Twitter has made it easy to send short messages, share them using hashtags and follow celebrities and brands. Weibo, which operates mainly in China, has the same features as Twitter. Chinese internet giant Sina spun off Weibo in an IPO in 2014, but still retains a controlling stake in the company.

Both stocks have proved to be minuscule investments this year. Twitter shares are down almost 20% and Weibo shares are down about 30%. Let's take a look at why investors have avoided both stocks and whether it's worth buying one of them.

At first glance, Twitter's business looks healthy. Its revenue rose 7% in 2020 as the pandemic held back growth in its advertising business, but jumped 45% year-on-year in the first nine months of 2021 as those headwinds eased.

The total number of monetisable daily active users (mDAUs) grew 27% to 192 million in 2020. At the end of the third quarter of 2021, it stood at 211 million mDAUs, up 13% from a year ago. This expansion was driven by its growth in overseas markets, especially Japan.

However, Twitter also became loss-making in 2020 and continued to bleed red ink in the first nine months of 2021. Most of these losses were due to tax and legal costs, but they were also amplified by a 30% increase. to its headcount this year.

Twitter also expects its impending sale of MoPub to reduce its revenue by $200 million to $250 million next year, which could make it difficult to meet its target of more than $7.5 billion in annual revenue by 2023. The sudden departure of CEO Jack Dorsey, who has handed over the reins to his CTO Parag Agrawal, also raises further concerns about its future.

Analysts expect Twitter's revenue to grow 37% this year but grow just 21% next year.

Weibo revenue

The company's revenue fell 4% in 2020 as the pandemic reduced advertising sales. The live streaming business was also hit by the downturn. But in the first nine months of 2021, Weibo's revenue jumped 39% year-on-year as these businesses recovered. Analysts expect the company's revenue for the year to grow by 37%.

Weibo's total monthly active users (MAU) grew less than 1% year-on-year to 521 million at the end of 2020. However, it ended the third quarter of 2021 with 573 million MAUs, up 12% year-on-year.

Next year, they expect Weibo's revenue and profit to grow by 12% and 29% respectively.