Chinese internet stocks are having a tough time and closing in the red almost daily. Since early summer, when markets realized U.S/China trade relations were worsening, leading companies in China started selling off steadily.

Weibo (NASDAQ:WB), Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU) and JD.com (NASDAQ:JD) are all trading near yearly lows. While JD.com and Alibaba could quickly snap back if sentiment shifted favorably for China-based companies, Weibo is getting the least attention and has the smallest market cap among these stocks.

In the second quarter, Weibo reported strong earnings and revenue. The company forecast revenue in the range of $465-475 million, within consensus estimates. Ad revenue jumped 69% from last year to $369.9 million.

Mobile MAUs (monthly active users) rose by 70 million from last year. Weibo now has 431 million MAUs. DAUs (daily active users) rose by 31 million from last year, totaling 190 million.

Weibo’s second quarter revenue from Alibaba grew a solid 137% from last year to $31.3 million. Continued marketing campaigns and initiative spending led to a repeat strong quarter, similar to the first quarter.

Investors are underappreciating Alibaba’s deep investments in Weibo. For example, Alibaba supported Weibo’s platform in June through a market campaign, along with various branded promotion events. The e-commerce giant also integrated Weibo’s payment solutions and video content, a move that benefited both companies.

Despite strong Q2 numbers and after rallying from $70 to above $80 in August, WB stock fell and closed at $72.30 on Sep. 5. The FIFA World Cup and other events may have exaggerated Weibo’s strong user growth in the quarter.

Yet management deserves credit for the growth. It leveraged its enhanced offering, improved its monetization capabilities, and diversified its advertising. Weibo now appeals to both small and medium-sized companies. The improved market experience is bringing a higher investment return for its customer base.

Weibo ended the quarter with cash, cash equivalents and short-term investments of $1.6 billion. Operating activities added $117.2 million to the cash balance in the quarter.

Better User Experience

Weibo improved upon its relationship-based feed by adding social attributes that would encourage higher user interactions. In the month of June, the company doubled the user engagement rate over last year. Though one strong data point does not guarantee a trend, the accomplishment is still noteworthy.

In the second quarter, users increased their consumption of short videos in the double digits, sequentially. As the company builds out its distribution of full-screen, ratable short videos, more users will likely come back more often and spend more time on the social site.

Weibo Stock Price Target

Only three analysts covered WB stock in the last month. Per Tipranks, the average price target is ~$129, implying upside of nearly 80%. Analyst Karen Chan of Jefferies, whose average return is 11.4% over two years, is the most bullish in the last month. Her price target is $140.

Of the seven models posted on finbox.io, the average price target is $90:

Source: finbox.io (click on the link to number-crunch a fair value)

Takeaway on WB Stock

Weibo’s unique distribution of video content sets the company apart from other Chinese online sites. Instead of putting a focus on the video content itself, Weibo shifted its attention on the user engagement levels between the content and the creator’s fan base.

This change paid off after only one quarter. WB stock trades at low valuations in the 19-times forward P/E range. For a company growing this rapidly, this multiple is too low.

Disclosure: The author does not own shares in any of the companies mentioned.