Market News

Momo Beats 4Q Estimates, Weak Outlook Drags Stock Down

Momo announced better-than-expected 4Q results. However, shares of the mobile social networking platform operator in China fell 4.1% as the company expects the COVID-19 pandemic to continue to negatively impact its top-line in 1Q.

Momo’s (MOMO) 4Q non-GAAP net income per American Depositary Share (ADS) of $0.58 topped consensus estimates of $0.41. However, the bottom-line result marked a year-over-year decline of 28.4%. Revenues of $581.6 million came in ahead of Street estimates of $564.9 million but declined 13.6% from the year-ago quarter’s sales of $673.4 million.

The year-over-year decline in the top-line was mainly due to a decrease in revenues from its Live Video Service segment, partially offset by an increase in the Value-Added Service division’s sales. The company ended 2020 with monthly active users of 113.8 million, down from 114.5 million at the end of 2019. (See Momo stock analysis on TipRanks)

For 1Q, Momo projects revenues between RMB3.36 billion and RMB3.46 billion, representing a year-over-year decline in the range of 3.7% to 6.5%. The company stated that the forecast considers the potential impact of the pandemic on the overall market and operational conditions.

Ahead of its earnings release, Morgan Stanley analyst Alex Poon downgraded the stock to Sell from Hold. Poon cited deterioration in risk-reward profile, potential regulatory risks, and weaker-than-expected recovery in the business environment as the primary reasons behind his rating downgrade.

Poon has a price target of $15 (7.5% upside potential) on the stock. Shares of the company have lost about 38.3% in value over the last year.

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