Yesterday, one of my favorite Chinese companies released earnings. In today’s blog, we’ll take a look at how this social media giant fared and what we can expect going forward from this international favorite…
Based in China, Momo Inc. (MOMO) operates a mobile-based social networking platform. Members can connect, establish new relationships and expand their social circles based on their location and personal interests. Thanks to its tools, services and features, including games, Momo has quickly grown into one of the leading social media platforms in China.
The company’s platform includes its Momo mobile application and various related features, functionalities, tools, and services that are provided to users, customers, and platform partners. Its Momo mobile application enables users to establish and expand their social relationships based on locations and interests. The company also offers games, which are designed with various themes, cultural characteristics, and features to appeal to various segments of the game player community .The company also develops paid emoticons and mobile marketing services.
Prior to the opening bell yesterday, Momo released third-quarter results. The Chinese social media company reported net revenues surged 126% year-over-year to $354.5 million, topping analysts’ estimates for $339.29 million in sales by 4.5%. Momo noted that the jump in sales was due in part to 4.1 million users paying for quarterly live video.
Third-quarter net income soared 102.8% year-over-year to $79.1 million, up from $39 million in the third quarter of 2016. And earnings per ADS jumped 87.5% year-over-year to $0.45, up from $0.24 per ADS in the same quarter a year ago. The analyst community was looking for earnings of $0.38 per share, so Momo posted an 18.4% earnings surprise.
Looking ahead to the fourth quarter, Momo expects net revenue between $370 million and $385 million, which translates to 50% to 56% annual sales growth. This is in line with analysts’ expectations for fourth-quarter sales of $382.08 million.
However, despite the earnings and sales beat, and the solid forward-looking guidance, MOMO dropped about 17% in early trading. Clearly, Wall Street was still worried about MOMO’s growth prospects in the coming months and years. What we need to consider is that Momo’s monthly active users increased 22% to 94.4 million in the latest quarter. And as long as Momo’s user base continues to expand, it will add to the company’s top and bottom line.
Despite Wall Street’s current skepticism, Momo maintains a Buy-rating in Portfolio Grader. I urge you to stay up-to-date with your favorite stocks’ Portfolio Grader ratings. It’s a wonderful tool to help you determine which stocks you want to hold onto and which it’s time to let go of.