MOMO Inc (ADR) – Perfect time for long position.

MOMO Inc (ADR) – this chinese company is showing amazing results during last couple of months. Similar to Tinder, MOMO offered users the chance to find people nearby.

Their main focus was changed from on-line dating service to live video stream and sharing service and it is now quite popular in China with 89 milion users.

The main financial change can be visible from Q1 2016 as Live Video introduction was having dramatic inpact on MOMO income level.

One year growth of Momo is 39.11%. Two years growth is 160%. MOMO’s Current Market Cap is $6.0B which shows still a lot of space for growth.

finviz dynamic chart for  MOMO

You can understand those reasons based on some numbers from MOMO’s Live video net income:

Q1 2016 – $7,5M

Q2 2016 – $15M

Q3 2016 – $39M

Q4 2016 – $83M

If you check their current stock price you can see that in last month this stock lost around 14%. One of reason is that investors were expecting amazing results on daily basis so they sell stock in first sight of trouble, second is that this is chinese company. To be honest for me it takes also longer before I believe in company numbers. The US stocks are more easy to check. I can see similarity to Alibaba (BABA) stock in this. Alibaba needed after IPO also some time to prove their way of thinking is more western style than chinese style.

There you can see that total future sales are expected like this:

FY2017 – $1 297 M

FY2017 – $1 754 M

FY2017 – $2 180 M (almost double within two years)

As I wrote there is 14% stock price descrese which I personaly used for opening my position at MOMO stock (at $31.8 per stock).  If any more decreese will come I am ready to make my position stronger, but I somehow worry that we now found local minimum and there will be no lower price soon. Both ways are fine for me.

Some people say that Live Streaming service reach the top already and there is no place for growth. At first I don’t believe we are even close to reach any top as we live in 21st century and people in Asia spend huge amount of their time on-line (and to be honest not only in Asia, right?). Other reason is that I believe in R&D of MOMO so I think they know very well that if they stop with development they may be forgotten soon. One article about MOMO’s future trend is here.

Net Margin is lovely 23%, P/E ratio is reasonable 24, EPS should almost double in next two years from $1.34 to $2.49 and MOMO is having no Debt so it is financial stable company.

There is currently good article about MOMO at Bloomberg so you can check it here as well.

Other article at Bloomberg shows more pessimistic point of view – see here.

Also I have to mention page about future income expectation and other finance related topics at 4-traders which you can check here.

All information mention in this article are just my personal opinions. I am not financial advisor and I do investing as my retirement preparation during free time. It is YOU who should consider all points by yourself before stock investment.

Thank you for reading.

 

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