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Momo (MOMO) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Momo Inc. MOMO is set to report third-quarter 2019 results on Nov 26.

For third-quarter 2019, revenues are anticipated between RMB4.25 billion and RMB4.35 billion, indicating an increase of 17-19% year over year.

The consensus mark for revenues is pegged at $613.6 million, up 14.5% from the year-ago quarter’s reported figure.

The Zacks Consensus Estimate for third-quarter earnings moved up a penny to 64 cents over the past 30 days. The figure suggests an increase of 20.8% from the year-ago reported figure.

In second-quarter 2019, Momo reported non-GAAP earnings per American Depositary Share (ADS) of 82 cents, which beat the Zacks Consensus Estimate by 13.9%. However, the figure plunged 39.3% year on year.

Revenues of $604.9 million surpassed the consensus mark of $581 million, surging 32% on a year-over-year basis.

Notably, the company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average positive surprise being 7.41%.

Let’s see how things are shaping up for the upcoming announcement.

Momo Inc. Price and EPS Surprise

 

Momo Inc. Price and EPS Surprise

Momo Inc. price-eps-surprise | Momo Inc. Quote

Factors to Consider

Momo’s third-quarter revenues and user base are likely to have witnessed a rebound. On Jun 21, posting suspension on the popular dating app, Tantan was lifted by the government authorities. Notably, daily active users (DAU) went back to the level before the inspection period by mid-August.

Additionally, steady growth from live broadcasting business backed by product innovation and operational efforts is expected to have driven top-line growth.

Notably, due to the download suspension and the related in-app purchase ban on iPhone users, Tantan's paying users had decreased to 3.2 million in the last reported quarter.

Nevertheless, Tantan's download and payment service was fully restored by mid-July. This is anticipated to have resulted in strong rebound in the company’s core metrics, including the number of active users and paying subscribers in the third quarter. By Aug 25, the paying users already went back to 4.1 million.

On the product side, two of Momo’s earlier product experiments — The Parking Lot and The Farm — gradually continued to gain popularity in the third quarter, owing to continuous upgrades and optimizations.

Notably, 40% of users on the platform connect with others through these virtual community experiences each day. The team has already started to build value-added service elements in The Parking Lot experience.

The company is expected to have provided its users with enhanced experience, driving revenue growth via gifts cards like Penguin and Gold Miners, and increased user interaction through live game competitions in the quarter under review.

However, mobile marketing revenues in the quarter might have declined due to prevalent headwinds in the overall ad market.

Regulatory issues and Tantan’s temporary removal from app stores are likely to have affected top-line growth and new user engagement in the to-be-reported quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates.

Momo has a Zacks Rank #3 and an Earnings ESP of +3.94%, which makes us confident of an earnings beat. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Stocks to Consider

Here are some companies, which, per our model, also have the right combination of elements to post an earnings beat this quarter:

Hewlett Packard Enterprise Company HPE has an Earnings ESP of +8.70% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. BURL has an Earnings ESP of +0.71% and holds a Zacks Rank of 2.

CarMax Inc. KMX has an Earnings ESP of +0.5% and carries a Zacks Rank #2.

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