Momo Inc. (MOMO 36.46, +3.91, +12.01%), which operates one of China's largest
mobile-based social networking platforms (similar to Tinder in the US), is
trading higher after reporting strong Q4 earnings results this morning.
Non-GAAP earnings per ADS came in at $0.59, which was above market
expectations. Revenue rose 44.7% yr/yr to $559.1 mln, which also was better
than expected. MOMO also guided Q1 revenue above expectations at RMB 3.55-3.65
Operating metrics are important for MOMO. Monthly Active Users (MAU) on the Momo app were 113.3 mln in December 2018, compared to 99.1 mln in December 2017. Total paying users of live video service and value-added service, without double counting the overlap were 13.0 mln for Q4, compared to 7.8 mln for 4Q17. In May 2018. This number also includes 3.9 mln paying users from the recently acquired Tantan. Momo acquired Tantan for about $600 mln in cash and stock. Tantan is a social and dating app in China for the young generation with a focus on the customer experience of female users.
Breaking down the revenue number is important for a company like Momo. Live video service revenue was US$430.4 mln, up 36% yr/yr. This growth was fueled by the increase in quarterly paying users, as well as the increase in average revenue per paying user per quarter. Value-added service revenue mainly includes membership subscription revenues and virtual gift revenues.
The total value-added service revenue was $105.1 mln, up 272% yr/yr, primarily attributable to the continued growth of the virtual gift business on the Momo application driven by more paying use cases introduced to enhance the social experience of Momo users. Mobile marketing revenue fell 15% yr/yr to $17.8 mln.
While its dating app has been growing very quickly, MOMO has been expanding in other areas, such as live video, mobile games, and music. In fact, its largest driver of revenue by far is its Momo Live Video Service, which launched in Sept 2015. In this service users (known as “broadcasters”) create videos and can be sent virtual gifts from viewers. MOMO gets a piece of that revenue.
The stock came under pressure during the tech sell-off in 4Q18. However, it has been making a strong comeback since mid-December At that point it was trading below $23 and it is now trading above $35.
MOMO is a fast-growing Chinese company with popular dating apps and a burgeoning live video service. With that said, MOMO is a bit on the speculative side as it has had some ups and downs related to earnings over the past year. This was one of the good quarters, but you need to be careful with this stock.
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