Momo (MOMO) earnings preview: Mobile marketing challenges might continue in Q3

Momo Inc. (NASDAQ: MOMO) is slated to report third quarter 2019 earnings results on Tuesday, November 26, before the market opens. Analysts expect the company to report earnings of $0.61 per share, compared to EPS of $0.51 reported a year earlier. Sales are expected to increase 16% year-over-year to $605 million.

The quarterly results are expected to benefit from growth in the user numbers after the restoration of Tantan’s services. Last quarter, the number of paying users of Tantan stood at 4.1 million. Strength in live video services and value-added services could also fuel topline results.

Last quarter, live video revenues saw double-digit growth due to increases in quarterly paying users and average revenues per paying user. Value-added service revenues more than doubled last quarter due to the growth of the virtual gift business.

However, challenges in mobile marketing are likely to continue in the third quarter dampening results. Last quarter, mobile marketing revenues fell 46% due to decrease in advertisement properties on Momo’s platform due to the suspension of certain user posting functions.

Revenues from mobile games also decreased 33% last quarter due to a drop in quarterly paying users of mobile games. It remains to be seen if there has been a pickup in this area.

Also read: JD.com Q3 2019 Earnings Report

In the second quarter of 2019, Momo beat revenue and earnings estimates. Revenues grew 32% to RMB4.15 billion, or $604.9 million while adjusted EPS amounted to RMB5.60 per ADS, or $0.82 per ADS.

For the third quarter of 2019, Momo expects net revenues to increase 17-19% to a range of RMB4.25 billion to RMB4.35 billion.

Momo’s shares have gained 54% year-to-date and 9% in the past three months.

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