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What to look for when Momo reports Q1 2019 earnings

Momo Inc. (NASDAQ: MOMO) stock has been struggling over the past year due to the ongoing trade war between the US and China as well as slowing of live streaming growth. The social networking platform has returned to be the focus of the investors as the company is set to release its earnings for the first quarter of 2019 on Tuesday before the market opens.

The company’s innovative strategies and investments could be driving the user base growth, which is expected to drive the quarterly results. The interactive tools, including a new gift card, Penguin Hitting, could drive the user base growth. The main features of the new gift card including the special effects that can be enjoyed by the users, who can also play live games and compete with each other.

Many Chinese tech stocks suffered from years of losses before becoming profitable, while Momo has never posted a loss in any quarter since its IPO in 2014. Over the past three years, Momo has a solid track record of beating street consensus. It is expected that the trend would continue in the first quarter as well.

Analysts expect the company’s earnings to drop by 21.70% to $0.54 per share while revenue will jump by 21% to $526.67 million for the first quarter. In comparison, during the previous year quarter, Momo reported a profit of $0.69 per share on revenue of $435.13 million. Majority of the analysts recommended a “strong buy” or “buy” rating while expecting the stock to reach $41.89 per share in the next 52 weeks.

Also read: Weibo Q1 earnings results

The company’s venture into offerings diversified strategies, apart from the traditional social connect features, could set itself apart from the social networking market. And this could attract the users as karaoke, short videos, games and other forms of audio and video experiences are offered by the company.

In addition, the recently acquired Tantan, which has a dominant position as a mobile dating app in China, could improvise the user experience that in turn will drive Momo’s user growth. It is expected that the rising use of audio and video interactions on Momo’s platform could improve monetization opportunities.

The purchase of Tantan has caused Momo to amount $710 million in long-term debt. However, Tantan has shown an amazing monetization rate of 3.9 million paying users in a total of 20 million monthly active users. Tantan could turn out to be an excellent investment for Momo as it continues to monetize its platform further and lifts its user base.

Related: Momo Q4 2018 earnings transcript

For the fourth quarter, Momo reported better-than-expected earnings and revenue due to the user base expansion. Driving the bottom-line growth, net revenues of the tech firm jumped 50% annually. Live video service revenue grew 36% amid solid growth in quarterly paying users and average revenues per user. Value-added service revenue nearly tripled, while mobile marketing revenue dropped 15% hurt by lower demand from advertising and marketing customers.

The company had 113.3 million monthly active users as of December 2018, up 14.3% compared to the corresponding period of 2017. The number of paying users for the live video and value-added services jumped 67% year-over-year to 13 million. For the first quarter, the company’s management predicts a 28% to 32% growth in revenues to the range of RMB3.55 billion to RMB3.65 billion.

Shares of Momo have fallen over 33% in the past year and over 19% in the past three months.

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