Why Weibo Corporation Shares Tumbled Today

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What happened

Shares ofWeibo Corporation(NASDAQ: WB) were sliding today on a widespread sell-off in Chinese tech stocks. As of 3:04 p.m. EST, the stock was down 9.8%.

So what

On a day when theNasdaqwas off 1.4%, Chinese tech stocks were getting hit especially hard.Alibabawas down 4% and several other Chinese tech stocks were off sharply, too, including the owner of China's Twitter-like service, Weibo.

Prior to today's sell-off, Weibo shares had nearly tripled this year, so today's dip could be seen as both a correction and profit-taking. China has also been targeted by president-elect Donald Trump several times, though a potential trade war would be unlikely to have an effect on a social-networking service like Weibo.

Now what

While there was no clear cause for either the Nasdaq's sell-off or the one in Chinese stocks, a comparison between Weibo and Twitter offers one explanation. Before today's slide, Weibo had a market cap of $11 billion, nearly as much as Twitter, and like its American counterpart, Weibo has struggled to generate a significant profit, with a P/E in triple digits. While the company has consistently beaten earnings estimates, its valuation may have become unmoored from reality -- meaning the recent pullback is warranted.


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