Weibo (NASDAQ:WB) was double downgraded to Underperform from Buy at BofA on Thursday, with analysts slashing the price target to $10 from $19.50 per share.
The investment bank noted the company's vulnerability to macro and competition risks as reasons for the sell rating.
"We believe, compared with major ad platforms, it may be more vulnerable to macro and competition risks," analysts wrote. "We estimate most of Weibo's ad is from consumption-related verticals, especially FMCG, and has brand promotion purpose. We expect brand promotion ad spend to remain soft in 2024 due to macro and advertisers' shift towards performance-based ads."
Furthermore, they explained that they are concerned about competition from short video platforms and other social channels, affecting traffic and ad revenue. "While Weibo has been trying to ramp up video content, it remains as a mainly text & picture platform with limited ecommerce ecosystem," analysts said.
Bank of America also sees other potential risk factors, including content risk, uncertainties regarding Alibaba's shareholding in Weibo, given the recent news of Alibaba's stake sales in other investees, and the company lagging behind peers with deeper pockets and stronger AI capabilities in the generative AI race.