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Weibo Corporation (NASDAQ:WB) Investors Are Paying Above The Intrinsic Value

In this article I am going to calculate the intrinsic value of Weibo Corporation (NASDAQ:WB) using the discounted cash flows (DCF) model. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. If you are reading this after June 2018 then I highly recommend you check out the latest calculation for Weibo here.

Crunching the numbers

I will be using the 2-stage growth model, which simply means we have two different periods of varying growth rates for the company’s cash flows. Generally the initial phase has higher growth rates that plateau over time. Firstly, I pulled together the analyst consensus forecast of WB’s levered free cash flow (FCF) over the next five years and discounted these figures at the rate of 12.24%. This resulted in a present value of 5-year cash flow of US$4.82B. Want to know how I calculated this value? Read our detailed analysis here.

NasdaqGS:WB Future Profit Jun 9th 18
NasdaqGS:WB Future Profit Jun 9th 18

The graph above shows how WB’s top and bottom lines are expected to move going forward, which should give you an idea of WB’s outlook. Now we need to determine the terminal value, which accounts for all the future cash flows after the five years. I think it’s suitable to use the 10-year government bond rate of 2.8% as the steady growth rate, which is rightly below GDP growth, but more towards the conservative side. After discounting the terminal value back five years, the present value becomes US$13.58B.

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The total value is the sum of cash flows for the next five years and the discounted terminal value, which results in the Total Equity Value, which in this case is US$18.40B. In the final step we divide the equity value by the number of shares outstanding. This results in an intrinsic value of $82.63, which, compared to the current share price of $105.2, we find that Weibo is fair value, maybe slightly overvalued and not available at a discount at this time.

Next Steps:

Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn’t be the only metric you look at when researching a company. What is the reason for the share price to differ from the intrinsic value? For WB, there are three essential aspects you should further examine:

  1. Financial Health: Does WB have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  2. Future Earnings: How does WB’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.

  3. Other High Quality Alternatives: Are there other high quality stocks you could be holding instead of WB? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!

PS. Simply Wall St does a DCF calculation for every US stock every 6 hours, so if you want to find the intrinsic value of any other stock just search here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.