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Momo Stock: Current Weakness is an Opportunity

Posted On December 4, 2017 2:11 pm
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Momo stock is trading in the red after the Chinese social media company posted third quarter results. Momo revenue increased by 126% in the quarter year over year to reach $354.5 million. Momo growth in subscriptions slowed down in the quarter, resulting in fears regarding growth prospects. However, live video streaming remains the strength of Momo. Live video streaming now accounts for more than 85% of the company’s revenue. Live video streaming is getting huge popularity in China. The industry has a total worth of $3 billion, as of the end of 2016. Analysts think that Momo has huge monetization opportunities. Advertisers are willing to pay higher rates for video ads.

In the fourth quarter, Momo is expecting a revenue of $370 million-$385 million, which shows a 50% jump year over year.

Momo’s monthly active user count stands at 94.4 million, compared to 91.3 million users reported in the third quarter. As of the end of the third quarter, Momo has about 4.1 million users who actually pay to watch live videos.

Momo is converting itself into a one-stop entertainment platform. The company started with a location-based dating app. It now offers videos, social media games and gaming features. Momo’s new “werewolf” feature is getting a lot of traction in China. The werewolf feature allows users to assume fictional identities to gain attention online.

Momo has a huge growth potential because the internet penetration in China is very thin. Just 53% of the total population in China has access to the internet. Hundreds of new people get online in the country. Most of the population prefer online videos and entertainment content, in which Momo is a leader.

On November 29, Jefferies reiterated a “Buy” rating for Momo stock but lowered its price target to $50. The price target shows a huge upside potential when compared with the current price.

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