not vested
ASIA STOCKS TO WATCH Momo Shares Fall Despite Strong Q1; Buy on Dip?
By Isabella Zhong
Momo (MOMO) slipped 4.11% in New York trading on Monday despite the Chinese video social video app delivering a triple beat of analyst expectations with its March quarter results.
Momo’s top line of $265.2 million was 8% above the consensus analyst estimate, while its non-GAAP net profit of $90.7 million was a towering 39% higher.
Its outlook for revenue growth in the current quarter of between 186% and 191% was also stronger than what analysts were expecting.
That said though Momo shares have rallied 123% this year and trade at a not-so-cheap 37 times earnings.
But Jeffieries analyst Karen Chan sees further upside for the stock. Chan, who reiterated her buy rating on Momo, has lifted her target price from $42 a share to $52 a share, which implies 27% upside.
The analyst continues to see long-term re-rating potential as Momo accelerates its monthly active user (MAU) growth with improving monetization potential underpinned by live streaming and advertising.
Momo’s has been accelerating its MAU growth on rising user engagement for video:
Live video service revenue came in 8% above our estimate at USD213mn mainly driven by overall platform MAU growth acceleration (85.2mn as of 1Q17, +18% YoY) and increasing paying user ratio to 4.8%, +0.5pcpt QoQ.
We expect Momo’s open social platform to continue to drive video sharing and consumption while broadening its addressable user base. Following its branding campaign since mid-April, the company will step up its paid channel marketing and optimize operational efforts (i.e. live streaming tournament).
We currently estimate MAU to reach close to 100mn by YE17. Chan also sees room for Momo to boost monetization.
We also see solid growth in mobile marketing (+45% YoY), driven by higher eCPM and sell-through rate, as well as VAS (+54% YoY) given better integration of virtual gifting with social use cases other than live streaming.
We revised up FY17/18 revenue est. by 9.5%/12% and profit est. by 11%/20.3%. Although stock has rallied by 88% since our initiation (see note) compared to NASDAQ of 8%, we continue to see long-term re-rating potential as Momo accelerates its MAU growth with improving monetization potential as a social entertainment app.
Source: Barron's Asia
http://www.barrons.com/articles/momo-sh ... 1495592283