Momo Inc: A Great Tech Stock No One Is Talking About
Momo Inc (NASDAQ:MOMO) is a great tech stock that no one really talks about. And that’s a shame, because MOMO stock was on a tear in 2018, before the marketwide sell-off. In 2019, the stock is up 71.5% year-to-date.
Part of the problem might be that Momo Inc is based, not in Silicon Valley, but in Beijing, China. And the U.S. and China have not exactly had the closest friendship over the years. Fraudulent Chinese stocks have also been an ongoing concern.
Moreover, when investors think of Chinese tech stocks, they gravitate toward the so-called bigger, safer names like Alibaba Group Holding Ltd (NYSE:BABA).
With a market cap of $7.6 billion, Momo is not exactly a tiny company operating in a shady business. It’s a leading mobile social networking app, and it deserves much more attention than it receives from the average investor.
That doesn’t mean the stock is not on Wall Street’s radar. In fact, analysts are extremely bullish on Momo; 25 analysts have provided a 12-month price forecast with a median target of $301.91 and a high estimate of $383.35.
The median estimate represents a 690% gain from current levels, and the high estimate represents a 901% gain. Even the low estimate of $228.19 per share is approximately 500% above the last price of $38.15. (Source: “Momo Inc (NASDAQ:MOMO),” CNN, last accessed April 15, 2019.)
Sure, analysts might be a wee bit aggressive with their 12-month share price forecast, but you get the point; analysts expect the company to perform well.
Momo Inc Overview
Momo Inc is a leading social media app operating in the biggest market in the world, China. The Beijing-based company, often referred to as China’s Tinder, lets users find friends and soon-to-be friends through profiles and precise location-based features. (Source: “Corporate Profile,” Momo Inc, last accessed April 12, 2019.)
The company also runs a video live-streaming platform, through which viewers can connect and buy virtual gifts, and mobile game services.
Because of its precise algorithms and analysis of user behavior, Momo can provide its users with a customized experience.
To that end, Momo Inc is busy getting the next generation hooked on its technology. In May 2018, Momo completed the acquisition of Tantan, a leading social media and dating app aimed at young Chinese singles.
And Momo Inc clearly has a product people want. The company’s monthly active users (MAUs) reached 113.3 million in December 2018, up from 99.1 million in December 2017, 81.1 million in December 2016, and 69.8 million in December 2015. That amounts to a compound annual growth rate of 12.9%. (Source: Ibid.)
MOMO Inc Stock
|Momo Stock Information|
|Market Cap||$7.6 billion|
|Shares Outstanding||206.9 million|
|50-Day Moving Average||$37.04|
|200-Day Moving Average||$32.45|
(Source: “Momo Inc. (MOMO),” Yahoo! Finance, last accessed April 15, 2019.)
MOMO Inc stock got off to a strong start in 2018, climbing more than 120% in the first half of the year. The stock took a tumble, though, in the fourth quarter of the year. But that was a result of a marketwide sell-off, not because of anything inherently wrong at Momo.
The stock started 2019 just like it did 2018 and is up 71.5% year-to-date. These gains are, in part, a result of the January effect. The company’s share price is also being fueled by strong fourth-quarter and year-end results, as well as a strong outlook for the remainder of the year.
MOMO stock has made strong gains this year and is about to form a golden cross pattern on its chart, a bullish indicator wherein the 50-week moving average crosses above the 200-day moving average.
Chart courtesy of StockCharts.com
Momo Announces Strong Q4 and 2018 Results
On March 12, Momo Inc announced its financial results for the fourth quarter and year ended December 31, 2018.
Fourth-quarter revenue increased 50% year-over-year to $559.1 million. Net income increased 2.5% year-over-year to $96.1 million ($0.44 per share). Adjusted net income was $129.1 million, up 22% from the same period of 2017. (Source: “Momo Announces Unaudited Financial Results for the Fourth Quarter and Fiscal Year 2018,” Momo Inc, March 12, 2019.)
MAUs totaled 113.3 million in December 2018, compared to 99.1 million in December 2017. The total number of paying users of the company’s live video service and value-added service was 13.0 million for the fourth quarter of 2018, compared to 7.8 million for the fourth quarter of 2017.
As of December 31, 2018, Momo’s cash, cash equivalents, term deposits, and short-term investments totaled $1.6 billion. Net cash provided by operating activities in the fourth quarter of 2018 was $169.2 million.
Momo Inc reported full-year 2018 revenue of $2.0 billion, a year-over-year increase of 51%.
Net income for full-year 2018 was $409.5 million and diluted net income was $1.92 per share. Adjusted net income was $503.5 million and adjusted diluted net income was $2.35 per share.
Momo Chairman and CEO Yan Tang commented:
Q4 was a solid quarter, closing out a fruitful year of 2018. I am pleased with the progress we made in 2018 in product innovation, monetization, financial performance and the strengthening of the Company’s position as a leading player in China’s open social space.
For the first quarter of 2019, ended March 31, Momo expects its total revenue to be between RMB3.55 billion and RMB3.65 billion, representing an increase of 28%–32% year-over-year on a constant currency basis.
Note that Momo did not provide its business outlook in U.S. dollars due to the recent volatility in the foreign exchange rate.
Momo Inc is a great tech stock with growing revenues. Not only that, it is consistently profitable—not something every tech stock can lay claim to. It has a strong balance sheet and cash position, and its MAUs have been increasing.
Moreover, the company’s outlook for the first quarter of 2019 is robust, which should translate into additional growth throughout 2019.
Momo Inc may not be a tech stock that most American investors are familiar with, but it’s a good example of why it’s important to look outside of our borders for investing opportunities.