Momo Inc. (MOMO), commonly referred to as the Tinder of China, is the nation’s fastest-growing provider of live video social content. MOMO skyrocketed nearly 140% across the first half of 2017 before dropping more than 40% across the second half of the year. The company’s stock has provided an 80% return in 2018 alone thanks to three straight impressive financial quarters. If you are interested in a growth stock, this Chinese social media company should be on your radar.
Momo’s stock price fluctuates more than most investors like, yet its valuation is quite intriguing. The stock is trading around 15 times its expected earnings for 2018. Though Momo sales growth is no longer as hot as it was in the past, falling from the triple digit range, the company is still a good value. Momo’s live video streaming service is outrageously popular, even though competitors such as YY are poised to gain market share. Furthermore, there is always the chance that the Chinese government will censor Momo. However, investors who have bypassed Momo for these reasons have missed out on quite the rally. If you have the stomach for potentially wild fluctuations in the months and years ahead, an investment in Momo is worth considering.
Momo’s primary app empowers users to find one another through share locations as well as profiles. This app is primarily used for dating purposes. The company debuted a live video streaming platform at the start of 2017 thanks to support from ad revenue and money made through its virtual gift offerings. The company’s active user base increased on a month-by-month basis beyond the 100 million mark, rising more than 20 percent across the year. It is clear Momo’s virtual gifts, live video service and other services are increasing in popularity throughout the Chinese market.
Momo’s profitability skyrocketed after the company added live video streaming to its already-popular app. This nifty feature allowed the company to monetize customer video broadcasts through virtual gifts. Momo is even dabbling in reality programming with its new show, Phanta City. This show is expected to generate nearly $15 million in revenue across the remainder of 2018. Furthermore, Momo debuted a premium subscription service in 2018 that provides enhanced dating matches powered through complex artificial intelligence. The company’s new features dubbed “See Who Likes Me” and “Super Exposure” have proven quite successful.
Those who are familiar with Tinder will recognize the Momo app, TanTan, upon first glance. TanTan uses similar left and right swiping mechanics as Tinder, making its mobile app user-friendly and intuitive. Momo is not resting on its laurels. The social media giant continues to add new features ranging from live audio chats to group video chats, social games like the uber-popular Werewolf and even a karaoke feature. The improvements are working: the CEO of Momo, Tang Yan, stated the typical user spent more 16 percent more time on the company’s dating app this year compared to the year prior.
Wall Street analysts expect Momo’s revenue to rise nearly 40 percent this year alone. However, this estimate does not account for the implementation of the recently acquired TanTan app. At the moment, Momo trades around $45. This price represents slightly less than 20 times the year’s earnings and about a 15 multiple of anticipated 2019 earnings. Such valuations are comparably cheap considering Momo’s growth rate.
Scoop up Momo today, hold it for years, and your investment will grow in unison with the Chinese market. An ever-growing number of people are turning to the web to find love, and Momo is poised to benefit. Do not hesitate to add this growth stock to your portfolio for the long haul.