A girl at a stand of Weibo Corp at an expo in Beijing, Oct 11, 2013. [Photo/VCG]

Weibo Corp stock price has more than doubled this year as steady user growth and an improved sales outlook have lured investors to Chinese social media. But, short sellers are becoming increasingly convinced the stock has peaked.

Bearish bets on Weibo, China's answer to Twitter Inc, are at the highest ever, even after the company reported earnings that beat analysts estimates and forecast a bigger-than-expected increase in third-quarter revenue. The Nasdaq-traded stock posted a 19 percent gain last week, while the number of shares borrowed for short selling rose to a record 4 million.

Bullish investors are betting that television and video partnerships the company has been forging will further boost the number of people using Weibo, which has been growing at a steady rate of about 30 percent annually for the past two years. Short sellers are wagering that a 119 percent rally this year, twice as much as the second-biggest gainer among Chinese stocks in the United States, has become excessive.

"There is a lot of optimism regarding Weibo," Henry Guo, an analyst at New York-based M Science LLC who has been covering Chinese American depositary receipts for a decade, said last week. "Investors bet that it has a potential to expand and monetize its business. The question short sellers are asking is, 'Can the stock rally last forever?' "

Since it was spun off from Sina Corp in April 2014, Weibo's stock has rallied 151 percent. Sina's ADRs gained 33 percent during the same period.

Weibo, backed by Alibaba Group Holding Ltd, has been adding video content and live-streaming features to its micro-blogging service, helping to boost the number of monthly active users to 282 million in the second quarter, Chief Executive Officer Wang Gaofei said in the second-quarter earnings statement last week. The company projected third-quarter revenue of as much as $178 million, exceeding analysts' estimates of $165 million.

The shares sell for 49 times projected earnings, above the average multiple of 42 among nine global peers, including Twitter and Facebook Inc, according to data compiled by Bloomberg. David Riedel, president of New York-based Riedel Research Group Inc, who cut Weibo to sell from buy in May, said last week that he's negative on the stock mostly because it's "cheaper to buy the Weibo exposure via Sina".

Other analysts, including those from Citigroup Inc and Jefferies Group, have recently raised their recommendations to buy. Weibo's second-quarter per-share earnings rose to 16 cents, compared with an estimate of 11 cents.

This is good news for KraneShares' Brendan Ahern, who has been increasing his position in the stock this year.

Bloomberg